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Aphria Inc (TSX:APH) Finally Divests From U.S. Pot: What Took So Long?

Aphria Inc  (TSX:APH) has finally divested itself of all of its U.S. assets. On Thursday it announced that it had sold its shares of Liberty Health Sciences, Inc. Aphria CEO Vic Neufeld claims this was a strategic decision, stating in the release, “Given the current federal legal framework in the United States, we have made the strategic decision to divest our remaining U.S. holdings at this time in order to permit us to focus on other more immediate capital markets and strategic opportunities in Canada and in other legal markets around the world.”

Was it really a strategic decision?

What’s perplexing about this is that Aphria knew long ago the situation in the U.S. and even sold off some of its assets earlier in the year when the TSX put companies on notice for having interests in pot south of the border that were not in compliance with U.S. laws and therefore would not be in compliance with the exchange’s listing requirements.

Why Aphria decided to wait so long to sell the rest of its holdings is unclear, especially since there’s been no reason to expect things to change in terms of the U.S. legalizing cannabis. At the start of the year, U.S. Attorney General Jeff Sessions even made sure to remind cannabis companies in states where pot was legal that federal authorities could still come after them.

While nothing happened, it definitely sent a strong signal that marijuana legislation wasn’t coming to the U.S. any time soon, and so why it took Aphria this long to decide to divest entirely is a bit puzzling. To call it a strategic move is a bit amusing, to say the least.

However, Aphria did leave the door open to regain its position, as it does have a five-year window where it can repurchase the shares, likely in the event that conditions in the U.S. become more favourable and cannabis gets legalized, at which point there will likely be a big rush to get into pot stocks south of the border.

What does this mean for investors?

The timing of this move is intriguing to me, as it’s hard to imagine Aphria would have had such a hard time finding a buyer for its stocks, especially with the hype we’ve seen in the cannabis industry over the past year.

While the sale will make Aphria a bit safer since it’s not putting shareholders at risk by having any holdings in U.S. cannabis companies, I’d find it a bit unnerving as a shareholder that the company waited this long to make such an obvious “strategic” move. Rival company and industry leader Canopy Growth Corp has steered clear of such controversies and it has not affected the stock’s impressive performance.

Management is an important piece of a company, and the steps Aphria has taken would make me hesitant to invest in it. I would’ve liked to see more of an explanation from the company as to why the sale didn’t happen earlier or, if at the time of the previous sale, for the company to have mentioned what it was going to do with its remaining assets. It makes Aphria appear a bit cryptic in its management, and that’s not something I’d look for in a possible investment.

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Fool contributor David Jagielski has no position in any of the stocks mentioned.

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