What happened

Shares of Aphria (NYSE:APHA) were down 12.2% as of 11:20 a.m. EST on Thursday. This marked the third consecutive trading day of big declines for the Canadian marijuana stock after a short-seller alleged that Aphria overpaid for its acquisition of LATAM Holdings and that insiders profited from the deal.

Aphria announced earlier today that its board of directors has appointed a special committee to review the acquisition of LATAM Holdings. Three independent directors on the company's board of directors who joined the board after the closing of the LATAM Holdings acquisition will conduct the review and will likely retain independent advisors to assist in the review.

In addition, shares of several of Aphria's major peers, including Aurora Cannabis, Canopy Growth, and Cronos Group, fell today as part of an overall market pullback related to increasing worries about the global economy. These concerns almost certainly contributed to Aphria stock's decline as well.

Marijuana growing in a greenhouse

Image source: Getty Images.

So what

Aphria's appointment of a special committee to review its LATAM Holdings deal is a positive sign. The allegations made by hedge fund Quintessential Capital Management and forensic analysis firm Hindenburg Research are grave. It's encouraging to see that Aphria's board of directors is taking the accusations seriously.

It should be noted that Aphria's management disputes the allegations about overpaying for LATAM Holdings. The company stated that it used an independent advisor in the process and performed due diligence in trying to make sure that the price it paid in the transaction was fair.

Aphria did disclose, however, when the transaction was first announced that some key insiders, including CEO Vic Neufeld, owned "a de minimis amount of shares and warrants" in SOL Global Investments, formerly Scythian Biosciences, the company that previously owned LATAM Holdings. Aphria insiders combined owned 2.1% of SOL at the time. These insiders recused themselves from all deliberations and votes related to the transaction. 

What about the concerns about the global economy? It's possible that recreational cannabis sales could be lower than they otherwise would be if an economic downturn results in consumers having less money to spend. However, the overall growth in global marijuana markets should still be significant.

Now what

Aphria didn't say how long the special committee will take to complete its review. Investors will definitely want to stay abreast of what happens in this process.

Assuming that there aren't any real issues identified with the LATAM Holdings acquisition, the most important things to watch with Aphria will be how quickly the company can crank up capacity to meet demand in the Canadian recreational marijuana market and how it fares in Germany's awarding of licenses for domestic medical cannabis production. If the company is successful on these fronts, this week's bad news could quickly be forgotten.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.