I know that many of you will consider me enemy #1 after this post.
In the time that I have been invested in APHA I have seen many soliders fall. There
were many good people who unfortunately held this stock too long and lost a lot
of money. We were roped in by the hype of the previous C Suite and the their greed
has punished us in so many ways. Now, we have a different problem with the current C Suite.
The problem we face now is an image and transparency problem. For 4 quarter's now we have
seen some very respectable earnings, only to have the positive effects of those earnings tempered by share dilution of some sort. Irwin has also not been true to his word either at times.
These are things that the markets notice and the market's are not being played like a fiddle by Irwin.
Now to my point.
After reviewing this most recent ER, Irwin's game plan is truly exposed.
Irwin has managed to muster up a consideralbe amount of debt. If you look at sections 16,17 and
18 of the latest consolidated financials, you can see the amount of indebtedness. Short term,
long term and even the convertible debentures. Now, add in the write downs that have occurred within the last year and a half, we are at a very dangerous level. And yes before anyone says well APHA has nearly 500 Million Cash, take a look at the financials, that cash is long term debt and assets are leveraged as well.
The reason I say it is dangerous, is because the debt is at levels that are unsustainable. Irwin
has managed to keep our share price down which will hinder any chance of a partnership or direct investment. The low share price strategy also ensure unrealized gains from the low share price that is below the base line of the convertible debentures. This prevents the convertible debentures from actually being converted. If this persists, the net result will be more dilution, because the institutions will want to re-negotiate their terms for a lower share price on the their CD and have more shares issued. They will probably then proceed to short the stock of a re-negotiated CD.
WHY IS IRWIN dong this?
-An undervalued company is easier to control, dial up one of the analyst's and ask for an upgrade and voila, the headroom in the low share price with an upgrade can provide a defense against a take over bid.
-When share's are greatly undervalued, the interest and ease of which to borrow money is surprising albeit at a very high carrying charge. There is the classic pump and dump scenario, not to mention the license to short the stock by the financial institution issuing the funds. Let's not even talk about the NAKED SHORTING that goes on.
-If debt repayment is necessary, it is easier for those third party financial house's to consider
debt repayment via undervalued share issuance, because of the space in the Share price using a pump and dump scheme.
-It can be easier to obtain a partner with a low share price to entice them, but if the number of
outstanding shares is high, this could be a problem considering the amount of dilution already
taken into account.
So in a nut shell, we need a partner. We also need to stop with the raises via CD and ATM. Aphria stock price is low and undervalued because the market does not like the lack of a partner, nor does the market like the dilution and debt. I am a holder of 40K shares.