It only took a day for Aphria Inc (TSX:APHA)(NYSE:APHA) to respond to an unsolicited offer from Green Growth Brands (CNSX:GGB). In a release on Friday morning, Aphria tried to outline to its investors why the deal wasn’t a good one.
Irwin Simon, who is the Chair of Aphria’s Board of Directors, stated in the response that “While we appreciate GGB’s interest in the value we have created at Aphria and our significant growth prospects, their proposal falls short of rewarding our shareholders for participating in such a transaction. Further, the proposed offer is quite risky given GGB’s condition to complete a brokered financing at a price that is more than double the recent average of their share price, as a key term to the proposal.”
Simon also suggested that the Board already had enough time to analyze and review the offer: “The Board has determined that the GGB proposal, as it currently stands, significantly undervalues the company. Aphria has a tremendous market opportunity as a leader in the sector and a strategic vision to meet those opportunities.”
Aphria’s leadership is clearly not impressed with the deal given how quickly they were able to make an assessment. Whether shareholders agree is a different question, however. But there is no denying this is an opportunistic play by Green Growth given its current price in relation to Aphria’s.
Green Growth’s share price was $4.98 as of Thursday’s close, and in just the past month has risen by more than 55%. Whether it is worth that price or not is hard to tell at this point, especially since it only started trading back in November. There’s been a lot of fluctuation in share prices recently among cannabis stocks, and Green Growth and Aphria have been going in opposite directions.
There’s a good chance that Aphria’s stock could very well recover from where it is today. While frustrated investors might simply want to take a deal and cut their losses, over the long term it could prove to be a very risky decision. With edibles coming in 2019 and recreational sales just starting to flow in, there could be another wave of excitement hitting pot stocks in 2019 that could see their values soar once again.
Was this just Green Growth trying to make a name for itself?
The more I think about this deal, the more I don’t believe that this was a serious offer from Green Growth. Up until now, few people probably knew of the company and by targeting a big company like Aphria it was a way to put itself on the radar. If that’s the case, it could have been a great marketing effort disguised as a real offer.
Green Growth had only recently started trading on the Canadian Securities Exchange back and it would have been easy to lose sight of amid all the other pot stocks and cannabis news taking place. By targeting one of the big pot stocks on the TSX and NYSE, it’s an easy way to make the headlines.
I wouldn’t expect Aphria investors to take this offer, and I don’t think Green Growth expects that to happen either.