Famous short seller Andrew Left has high hopes for Aphria Inc. (APHA).
In a research note, Left’s firm Citron Research claimed that the heavily shorted marijuana stock could hit $8 within the next two weeks because it has emerged as a prime acquisition target for either a major consumer packaged goods company or another marijuana producer.
"Expect an $APHA major partnership or total buyout SOON," Citron tweeted on Tuesday after publishing its report.
Citron’s bullish note, on top of news that Aphria expanded on an existing licensing agreement with Rapid Dose Therapeutics to offer its QuickStrip oral drug delivery system to customers in fast-growing marijuana market Germany, lifted the Canadian company’s shares 7.79% during Tuesday’s trading session.
Why Aphria Is a Prime Acquisition Target
According to Left, large consumer companies want to gain exposure to the marijuana industry and see Canadian cannabis cultivators as the safest way to do so. While Left believes that federal legalization in the U.S. is “around the corner,” following the ousting of anti-marijuana Attorney General Jeff Sessions and Washington’s decision to replace John Kelly with pro-legalization Mick Mulvaney as White House Chief of Staff, he added that it will still take at least 18-24 months for the law to change. As a result, he said that Canadian companies are “the only game in town in the near-term.”
Looking at Canada, Left identified Aphria as the most feasible acquisition target as the other two U.S.-listed cannabis companies yet to announce an investment by a major U.S. partner, Tilray Inc. (TLRY) and Aurora Cannabis Inc. (ACB), are currently too expensive.
“It is important to note that Aphria checks all the boxes to be a platform. It has growing operations, distribution, international, and R&D,” wrote Left. “To any of the critics who think this is any different than Cronos (if you exclude management issues -- which can be easily rectified) - you are ill-informed. Aside from deals like we saw last week in Paraguay, Aphria has formed partnerships globally that are now being coveted by the larger CPG companies.”
Who Could Make a Play for Aphria?
Left went on to speculate that Diageo, the maker of Guinness beer and Smirnoff vodka, could be plotting to make a move for Aphria. Failing that, the famous short-seller proposed that a larger competitor, such as Tilray or Aurora, could pounce on the Canadian company.
Buying Aphria, Left said, would give Tilray a “real business to justify its overvalued stock price” and remove a competitor from the market, as well as giving it, together with Aurora, a better shot at an investment from a major CPG company.
Citron’s bullish note emerged shortly after Quintessential Capital Management and Hindenburg Research published a sentiment-damaging report on Aphria. The short sellers claimed that the marijuana producer is "part of a scheme orchestrated by a network of insiders to divert funds away from shareholders into their own pockets."