What happened

Shares of Aphria (APHA) were tanking by 13.2% as of 10:16 a.m. EDT on Monday while shares of Tilray (TLRY) were falling by 11.9%. The declines for both stocks came after Aphria reported disappointing fiscal 2021 third-quarter results before the market opened on Monday.

So what

Aphria badly missed analysts' top- and bottom-line estimates for the third quarter. The Canadian cannabis producer's net revenue slipped 6% year over year to 153.6 million Canadian dollars. Aphria posted an adjusted net loss of CA$47.9 million in Q3, much worse than its adjusted net loss of CA$9.8 million in the prior-year period.

Gloved hand holding cannabis leaf in front of a  Canadian flag

Image source: Getty Images.

The company blamed the worse-than-expected performance primarily on the COVID-19 pandemic. Lockdowns in Canada, particularly Ontario, and in Germany negatively impacted sales.

It makes sense that Aphria's shares would sink on its Q3 update, but what about Tilray? The marijuana stocks have basically moved in lockstep since the announcement of a merger of the two companies. This merger transaction will be an all-stock deal. As a result, any change in Aphria's share price directly impacts Tilray's share price. 

Now what

A special meeting of Aphria shareholders is scheduled for Wednesday of this week to vote on the merger with Tilray. It's likely that the deal will be approved. Assuming there aren't any regulatory roadblocks, the transaction is expected to close in the second quarter of 2021. 

The combined company will rank as the world's biggest cannabis operator. However, merging with Tilray won't eliminate the challenges that Aphria faces. The good news, though, is that Aphria's fortunes could improve as coronavirus worries taper off with the increasing availability of COVID-19 vaccines.