Cannabis stocks were a sea of red on Monday, weighed down by Aphria Inc. after it swung to a wide loss in the third quarter that outweighed a surge in revenue.
Aphria shares APHA, -12.87% APHA, -11.93% fell 15% in early trade, after the Leamington, Ontario-based company posted a C$108.2 million ($81.1 million) for its fiscal third quarter, or 43 cents a share, after a profit of C$12.9 million, or 8 cents a share, in the same period a year ago.
Excluding nonrecurring items, such as noncash impairments and additional nonoperating losses, adjusted gross profit was C$13.4 million. FactSet does not provide consensus estimates for Aphria.
Revenue climbed to C$73.6 million from C$10.3 million in the first full quarter of Canadian legal cannabis. But the company sold less cannabis than a year ago—kilograms sold fell to 2,636.5 from 3,408.9, while the average retail selling price for medical cannabis increased to C$8.03 per gram from C$7.51, primarily because of higher oil sales. The average price for adult-use cannabis fell to C$5.14 from C$6.32, due to a shift to smaller package sizes.
The company said it took a C$50 million non-cash impairment charge on its Latam Assets that were acquired last September and later became the subject of a review by a special committee. That review was sparked by a report from short sellers Quintessential Capital Management and Hindenburg Research, who said the C$280 million deal involving companies in Argentina, Colombia and Jamaic raised red flags as their research suggested the assets were worthless.
The committee found conflicts of interest for some board members that were not disclosed to the board, as MarketWatch reported in February.
“Aphria’s earnings show a quarterly loss exceeding $100 million, negative margins, decreased production volume, regulatory scrutiny and a large write off for its Latin American acquisition, which we think will be the first of many,” Gabriel Grego of Quintessential told MarketWatch on Monday.
“As our research showed, the company’s actual performance was not what they were telling the market. We respect the new management team, which is undertaking the challenging job of fixing the dire situation left behind by their predecessors.”
Separately, Aphria said it has entered into a series of deal to accelerate the expiry date of the unsolicited offer launched by Green Growth Brands Inc.GGBXF, -1.04%
Organigram Holdings Inc. shares OGRMF, -6.53% fell 4.5%. Like Aphria and other rivals, Organigram posted a loss for its fiscal second quarter, while revenue topped estimates. The company reported a net loss of C$6.4 million ($4.8 million), or 5 cents a share, after earnings of C$1.076 million, or 1 cent a share, in the year-earlier period.
Net revenue (excluding excise taxes) came to C$26.9 million. The consensus of four analysts polled by FactSet was for EPS of 2 cents and revenue of C$24.2 million.
The company said its “all-in” cost of cultivation came to 85 cents per gram of dried flower harvested, down from C$1.48 a year ago, mostly due to higher yields per plant. It is now focusing on vaporizable pen technologies and a range of edibles ahead of the launch of derivatives in Canada in the fall of 2019.
U.S. cannabis retailer MedMen Enterprises Inc. MMNFF, +1.44% offered unaudited revenue numbers for its fiscal third quarter to end March of $36.6 million, up 22% over the second quarter. The growth was driven by the company’s retail expansion in Nevada and Arizona, where sales rose 34% and 513% respectively, from the second quarter.
In Nevada, the company’s Paradise location, which is closest to McCarran Airport, is the company’s second highest performer, with a 39% increase on the second quarter.
The company said pro forma revenue, including for acquisitions that have not yet closed, came to $54.9 million, up 11% from the second quarter. The company announced plans to acquire PharmaCann LLC in October, in an all-stock deal valued at $682 million.
In regulatory news, the U.S. Hemp Authority is revising guidelines for CBD producers seeking a seal that ensures the safety of their products and has set an April 15 deadline for manufacturers to comment on how the industry should self-regulate, Marijuana Business Daily reported.
The U.S. Food and Drug Administration has separately pledged to hold a public hearing on May 31 for stakeholders to share their experiences, and offer information and views on how the CBD market should be regulated. While hemp was fully legalized in the December Farm Bill, CBD was moved under the purview of the FDA from the DEA, and the former has said companies cannot add it to food or beverages without its approval.
Meanwhile, investors are bracing for the initial public offering later this week of what will be the closest thing to a U.S. cannabis company available for trade on a major U.S. exchange. Greenlane Holdings Inc. GNLN, +0.00% a Florida-based maker of cannabis vape hardware and accessories to retail businesses and consumers across the U.S., Canada and elsewhere around the world, is expected to price its IPO on Wednesday and to start trading Thursday on Nasdaq, under the ticker symbol “GNLN.”