Cannabis stocks were mostly lower Wednesday, led by Aphria Inc. after the company rejected a hostile bid from Green Growth Brands Inc. that it said significantly undervalues the company.
Shares of the Canadian cannabis company APHA, -9.43% APHA, -9.03% slid about 7% in early trade, while Green Growth GGBXF, -7.75% was down 6%.
Aphria said the bid offers its shareholders a substantial discount to its current and future value rather than a premium, and would effectively give Green Growth a 36% interest in Aphria in exchange for share in a company with “limited operations” or other experience in the cannabis industry.
Based on the 20-day volume-weighted average price of Green Growth shares before it announced the bid on Jan. 22, the bid reflected a 23% discount to Aphria’s stock price over the same period.
“Regardless of their brazen attempts to suggest otherwise, GGB is asking Aphria shareholders to accept a substantial discount on their shares, as well as delisting from both the TSX and NYSE, resulting in a vast dilution of their ownership in Aphria,” said Aphria Chairman Irwin Simon.
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Aphria said its financial adviser, Scotiabank, agreed that the hostile bid is inadequate, from a financial point of view, to Aphria shareholders.
Adding to the pressure on the sector was the news that New York City has become the latest state to crack down on edibles that include CBD, or cannabidiol, a non-psychoactive ingredient in cannabis that is widely held to have wellness properties.
The Department of Health and Mental Hygiene is ordering restaurants under its jurisdiction not to sell food products that contain CBD, the New York Times reported.