Liberty Health Sciences Inc. (CSE:LHS) (OTCQX:LHSIF) has found itself in the middle of a whirlwind of controversy lately. In early January, Aphria insiders left the Liberty Health Sciences board. A month after, Aphria decided to divest its entire interest in Liberty Health Sciences, shocking most investors.
Due to these occurrences, both the CEO and CFO of Liberty resigned, leaving the company with a lack of leadership.
Can anything positive come out of this? Maybe.
Liberty Health Sciences and Aphria: What Went Wrong?
In early September 2018, Aphria Inc. (TSX:APHA) (NYSE:APHA) entered into a share purchase agreement with Liberty Health. One theory by stock analyst Benjamin Smith was Aphria left Liberty due to its passive interest.
At first, Aphria held primary control in the combined entity but as time passed that stake became less and less. Bought deals, share divestitures, and acquisitions brought Aphria’s stake lower as time wemt on. Smith’s theory is that Aphria wasn’t pleased with its minority stake of less than 20% of Liberty and with such little stake, Aphria had very little say on Liberty Health Sciences’ company direction. Smith believes that Aphria wasn’t pleased with being a passive investor.
This is just one theory, but out of all out there, this seems the most logical. Is there any upside to this madness for Liberty Health Sciences though?
Adding to the fire, a class action lawsuit has also been filed against Liberty Health Sciences on behalf of investors. The complaint alleges that the defendants made misleading or false statements. The lawsuit states that “Liberty, in conjunction with Aphria, was involved in a scheme whereby numerous fraudulent acquisitions and transactions were made to provide undue benefits to both companies’ insiders.” These often sprout up from time to time in this emerging industry, but it has kept investors away.
Not all movements by Liberty Health are negative though. Aphria backing out of the deal and Liberty’s CEO and CFO leaving were a bit of a shock, but the company is now being led by current President Victor E. Mancebo. While one position still needs to be filled, there is no ramp-up period for the new executive as he’s already familiar with Liberty’s operations.
It may take some time for the dust to settle, but it seems investors are gaining trust again in the company as its shares are trading green today.
Liberty Health Stock Movement
On the CSE, LHS stock is trading at $1.01 a share, up +$0.01 (+1.00%). On the OTCQX, LHSIF stock is trading at $0.75 a share, up +$0.005 (+0.39%).
If you’re an investor and already own Liberty shares, the company is making a turn in the right direction despite the craziness the past two months. It may take some time for the cannabis company to get back on its feet, but the two new dispensary openings are positives.
Featured Image: Canva