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It was November 2020 when Aphria shares came on the radar of analysts at A&F Investments. Aphria is a Canadian company, which produces and distributes medicinal and recreational cannabis. In this article, I will explain why we bought this stock and the developments after that.
As a result of the market in which Aphria operates, the company is very dependent on regulations regarding the use of cannabis. The use of medicinal cannabis was legalized in Canada at the end of 2018. This provided new opportunities for Aphria. These developments, of course, go hand in hand with a public opinion regarding the use of cannabis, which the population has become increasingly supportive of.
Because the recreational cannabis market is still very young in Canada, there are no established players yet. At this point, Aphria is the market leader in Canada and the closest to becoming profitable. The company’s financial position is good: they have about $400 million in cash and relatively low-interest rates on their debt.
Finally, in November 2020, A&F Investments decided to purchase 50 shares of Aphria for $6,297 per share, totaling approximately $315. This has been a great decision and Aphria has proven to be a true gem. I will discuss the developments after our purchase below.
The price development of Aphria stock, from the time we purchased the stock:
The merger with Tilray
On December 16, 2020, it was announced that Tilray and Aphria had plans to merge. Tilray operates in the same market as Aphria and also has a market share in Europe. So after this merger, there can definitely be synergies, which can make the merged company profitable. Therefore, the shareholders were definitely approving of this merger.
February 2021 saw a huge spike in the price of Aphria shares. This is due to the attention the stock received on Reddit (r/wallstreetbets). At that time, the stock was about 4x higher than at the time of our purchase.
“This has been a great decision and Aphria has proven to be a true gem.”
At the end of March, it was decided by A&F Investments to sell part of our position after the huge rise to secure at least part of the profit. At that time, 18 shares were sold for $17.23 each. This yielded about $310, which gave us back our deposit. In addition, we still had 32 shares left and amounted to a return of about 174%!
Because of the merger, shareholders of Aphria would receive 0.8381 shares of Tilray for every share of Aphria they have. In fact, the company will continue as Tilray. Since A&F Investments still had 32 shares, this means we got 26 new shares of Tilray.
So at the moment, we have 26 shares of Tilray and the return is 181%. So Aphria was actually a super good buy and has proven to be a true treasure in our portfolio. May there be many more of these great purchases for A&F Investments!
