Aphria Inc (TSE:APH) (OTCMKTS:APHQF) (FRA:10E) may be preparing for a run at up-listing on the New York Stock Exchange, according to recent filings. The Leamington-based cannabis operator appears to be making behind-the-scenes maneuvers to satisfy current or eventual listing requirements down south—with a specific emphasis on the NYSE. We look further into the evidence at hand.
According to a Management Information Circular filed by Aphria on SEDAR September 28th, the company has set forth the purpose, composition, responsibilities and authority of the
Audit Committee of the Board of Directors. One such directive filed under Audit Committee Charter 2.0(b) deals with composition and membership of the Committee, in which member or members must meet specific United States Securities Act requirements, such as those set out in Item 407 of Regulation S-K and Rule 10A-3, as amended and Section 303A.02 of the NYSE Listed Company Manual.
Audit Committee of the Board of Directors. One such directive filed under Audit Committee Charter 2.0(b) deals with composition and membership of the Committee, in which member or members must meet specific United States Securities Act requirements, such as those set out in Item 407 of Regulation S-K and Rule 10A-3, as amended and Section 303A.02 of the NYSE Listed Company Manual.
Pertaining to Board independence (Exhibit “B” Board Mandate), the NYSE is referenced once more:
A majority of the Board will be comprised of directors who are “independent” per the standards and requirements promulgated by all governmental and regulatory bodies exercising control over Aphria as may be in effect from time to time, including Section 303A.02 of the NYSE Listed Company Manual and relevant rules of any other stock exchanges on which Aphria’s shares are listed.
303A.02 of the NYSE Listed Company Manual addresses the definition of “independent director” for purposes of exchange standards. It sets forth specific guidelines for the qualification of independent directors, which companies must attain before exchange listing is granted. If Aphria is diverting effort towards complying with NYSE standards, it’s hard to believe they aren’t doing so without a specific purpose.
Of note, the information does not indicate if Aphria has commenced it’s up-listing bid, or when. The management circular only explicitly expresses that Aphria is attempting to achieve compliance with United States Securities Act requirements, with an emphasis on NYSE regulation 303A.02.
Secondly, the other major U.S. exchange possibility—NASDAQ—was not referenced anywhere in the circular. In my view, this does not guarantee APH won’t join Cronos Group Inc. or Tilray Inc. on the tech-heavy exchange; rather, it implies Aphria is attempting to get compliant with NYSE regulations specifically.
Overall, the U.S. exchange listing push shouldn’t come as a surprise to investors. On September 6th, Aphria announced the sale of all 64,118,462 shares it owned in Liberty Health Sciences Inc.—a vertically-integrated cannabis licensed producer operating mainly in Florida. Of particular note, the complete divestiture occurred ahead of schedule; previously, the shares were to be divested in four equal tranches in 6-month intervals between February 2019 and July 2020. The fact that Aphria expedited the process was not lost on the Midas Letter—or the market for that matter.
With the verbiage seen in the Management Information Circular, we can conclusively see why. The biggest remaining question is about timing, and whether Aphria will beat fellow up-list contenders CannTrust Holdingsand Aurora Cannabis to the punch.
