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Here's Why Aphria Stock Fell 33.1% in November

By Cory Renauer - Dec 6, 2018 at 9:16PM

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The marijuana stock's first month on a major exchange was one that shareholders would rather forget.

What happened

Shares of Aphria ( APHA ) began trading on the New York Stock Exchange on Nov. 2, 2018. After a slight gain over the first few trading sessions, enthusiasm for the licensed Canadian pot producer fell apart. During the month of November, the marijuana stock fell 33.1%, according to data from S&P Global Market Intelligence.

So what 

Listing on a major exchange makes it possible for a wider range of investors to add Aphria stock to their portfolios, including institutional investors previously hamstrung by the company's over-the-counter listing. Unfortunately, the bottom fell out from under marijuana stocks immediately after Canada began allowing adult-use sales on Oct. 17, just a couple weeks before Aphria gained its NYSE listing. 

Exhausted man in suit holding a downward-sloping arrow.

Image source: Getty Images.

Increased access helped Aphria's market cap rise to $2.9 billion within several days after listing on the NYSE, but it didn't last long. Investors peering closer into Aphria's fiscal first-quarter report noticed the company earned an $8 million gross profit during the three-month period that ended in August. That wasn't nearly enough to stretch across $24 million in operating expenses that the company racked up during the period, and investors worried about further losses began showing their concern.

Now what

Aphria's market beating continued into December after a short-seller report accused the company of buying buildings and businesses owned by Aphria insiders at inflated prices. Aphria has denied the allegations, but that hasn't helped investors forget about the Nuuvera acquisition the company completed earlier this year.

Aphria executives didn't tell investors that they owned significant shares of Nuuvera until the day before the company closed on the 425-million-Canadian-dollar acquisition. In September, the company closed on a CA$300 million deal for acquisitions throughout Latin America, and investors are going to be looking for signs they bought something worthwhile when Aphria reports results for the three-month period ended November.

If Aphria can't show investors clear signs that its questionable international investments will generate significant income, the company's recent $859 million market cap could fall much further.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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