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Aphria review of acquisitions at centre of short seller allegations finds price paid was on the high end

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Cannabis company Aphria Inc. says a review of recent transactions that a short seller cast doubt on has found the company paid a high price for the assets in question, and certain company directors had “conflicting interests” in the deals that weren’t disclosed at the time. 

The Leamington, Ont.-based company revealed the results on Friday of a special committee of independent directors tasked with looking into a slew of deals the company made last year.

The controversy began in December after two New York short-selling firms — Quintessential Capital Management and Hindenburg Research — accused the company of paying hundreds of millions of dollars for assets in the Caribbean and South America that the short sellers alleged were basically worthless.

The short sellers also said insiders at Aphria personally profited from the deals because they had financial stakes in some of the companies that were taken over.

Aphria’s shares plunged in the days that followed, even as the company disputed the claims and promised to get to the bottom of the matter by way of an independent review.

That review found the company paid on the high side of what the assets in questions are worth — albeit within a range that would be considered a fair price.

“The consideration paid for the assets purchased in the acquisition was determined to be within an acceptable range as compared to similar acquisitions by competitors, be it near the top of the range of observable valuation metrics,” Aphria said of the so-called LATAM deals, which together cost the company roughly $700 million.

The company also revealed Friday that “it appears that certain of the non-independent directors of the company had conflicting interests … that were not fully disclosed to the board,” but didn’t specify which directors.

Friday’s news is Aphria’s most significant statements on the issue since the story broke last year. During its last earnings release, the company declined to say much on the matter until the review was done.

In late December, Aphria named Irwin D. Simon to be the independent chair of the company’s board of directors, and then in January announced that CEO and founder Vic Neufeld and co-founder Cole Cacciavillani would be leaving their roles at the company, something which will formally happen on March 1.

On Friday, Aphria announced that John Cervini would also leave his position on the board as of that date, although he will stay on in a “non-executive operational capacity.”

Cacciavillani and Neufeld will remain as “special advisers” while having no formal role at the company.

“Though I was not part of Aphria at the time of the LATAM acquisition, the special committee’s findings give me and the board full confidence that it was executed at an acceptable value and is consistent with the company’s international growth strategy,” said Simon, who will become the company’s CEO on an interim basis until a permanent replacement can be found.

“With this behind us, we are committed to fully focus on our bright future and creating value for all Aphria shareholders. I’m optimistic that the special committee’s further recommendations for improving our corporate governance will serve us well in the future.”

One of the author’s of the original short selling report, Hindenburg Research, told CBC News in a statement Friday that the Aphria’s report vindicates their original argument.

“We applaud the independent committee for taking this matter seriously and for making significant changes to the company’s board and governance policies,” founder Nathan Anderson said. “The review largely corroborated our findings that acquisition prices were high and that multiple insiders had undisclosed conflicts of interest. We hope the company can turn a new leaf going forward.”

Investors seemed to welcome the news Friday, as Aphria’s shares gained half a dollar to $12.59 on the TSX. In the days immediately following the short report, the company’s stock bottomed out at $5 a share.

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Chris Selley: The blinding incoherence of Ottawa’s hotel-quarantine theatre is becoming obvious

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Canada’s new mandatory hotel quarantine system landed over the weekend like a wet, mildewy towel. You have to book by phone. No one answers. There are multiple reports of Canadian citizens being put on hold for three hours, then cut off seemingly automatically.

“Our trained and specialized travel counsellors are providing around-the-clock service to facilitate hotel bookings,” a spokesperson for American Express Global Business Travel told National Post.

The “regular hours of operation” listed are 8 a.m. to 11 p.m., Ottawa time.

Officials have blamed the call backlog on people calling too far in advance of travel. Would you wait until the recommended 48 hours before your flight? The online advice implies you need “proof of having reserved and pre-paid for (hotel) accommodation” even to get on the plane. In fact, help is available for those disembarking without reservations, a Public Health spokesman said.

That might be useful information to put on the internet. But then, so would a reservation system. All the participating hotels already have one of those.

For now, this all-too-predictable shambles isn’t a problem for the government. On social media, many are revelling in the misery and stress it’s causing, calling it travellers’ just deserts  — never mind if it’s an expat coming home to take a job, or a grieving family returning from a funeral, and not some fully vaccinated cartoon-villain snowbird. Former Ontario finance minister Rod Phillips and Canada’s other gallivanting politicos created a full-on moral panic overnight, and the feds, hitherto scornful of anyone who suggested international travel was worth worrying about, were happy to provide some red meat.

The populist glee will wear off, though, and the blinding incoherence of this policy will eventually dawn on people. There is evidence right here at home that may illustrate the problem.

Since November, travellers arriving at Calgary’s airport on international flights, or overland  into Alberta from Montana, could take a test upon arrival, and another a week later, and upon receipt of two negative results avoid the 14-days quarantine that has otherwise been demanded of “non-essential” humans entering the country for nearly a year. That “pilot project” was unceremoniously cancelled Sunday night.

At first, participants were allowed out and about, with a few restrictions, as soon as the test-on-arrival came back negative — usually within 48 hours. Upon receipt of the second negative result, they were subject to even fewer restrictions for the remainder of the two weeks. Later, travellers from the U.K. and South Africa were excluded; the federal rule requiring a negative test to board a flight to Canada kicked in; and on January 25, the rules changed such that pilot-project participants had to remain in quarantine until the second negative result after a week.

With the U.K. and South Africa excluded and a negative test required to board, the percentage of travellers testing positive on arrival dropped by half, from 1.47 to 0.75 per cent; the number testing positive a week later dropped by one-third, from 0.74 to 0.5 per cent.

It’s a small sample size. It doesn’t prove anything. But it’s intuitive: if you weed out high-risk travellers, and test before departure, you get fewer initial positives. This hints at one approach Canada could have taken but didn’t: focus more stringent measures on certain countries. Do we really need to treat arrivals from famously COVID-free countries like New Zealand (0.7 new daily cases per million population, on a two-week average), or Taiwan (0.03 cases), the same as those disembarking flights from Israel (384), the United Arab Emirates (296) or the United States (202)?

That one in 200 travellers were still testing positive after a week highlights the central flaw in the government’s plan, however. As I noted two weeks ago, research suggests the probability of a “false negative” PCR test only falls below 50 per cent on the fifth day after infection. If your goal is to prevent international travellers from transmitting COVID-19 to anyone in Canada, you can accomplish it vastly more effectively with a five- or seven-day quarantine, followed by another test, than with three days waiting for the result of a test conducted at the airport.

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Carleton Master’s Sociology Student to Receive Royal Ottawa Award for Mental Health Work

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Charlotte Smith, a Carleton University master’s student in Sociology, has faced overwhelming challenges throughout her life: childhood sexual abuse, homelessness, incarceration, drug dependency.

Undaunted, she has channelled these experiences into her academic, advocacy and activist work, developing research projects to address youth homelessness, creating a bursary to help homeless youth attend Carleton, and delivering food, phones and other essential items to homeless and precariously housed youth who are struggling during the pandemic.

For these actions, and for sharing her story of recovery to help eliminate the stigma surrounding mental illness, Smith will be awarded the Personal Leader for Mental Health award at the Royal Ottawa Foundation for Mental Health’s 2021 Inspiration Awards.

“It can be re-traumatizing, embarrassing and awkward talking so publicly about your mental health and substance use issues, so it’s comforting when someone tells you that you’re not just oversharing, you’re actually making a small difference in other people’s lives,” says Smith, who will be joined on the Inspiration Awards virtual podium by Carleton President Benoit-Antoine Bacon, winner of the Royal’s Transformational Leader award.

“Getting an award like this is fantastic, but there are so many people doing so much important work on mental health and substance use,” says Smith, who last year won a Community Builder Award from the United Way East Ontario for her volunteer efforts in COVID times.

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Shopify Launches Offering of Class A Subordinate Voting Shares

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OTTAWA, Ontario–(BUSINESS WIRE)–Shopify Inc. (NYSE:SHOP)(TSX:SHOP) (“Shopify”) today announced that it has filed a preliminary prospectus supplement (the “Preliminary Supplement”) to its short form base shelf prospectus dated August 6, 2020 (the “Base Shelf Prospectus”). The Preliminary Supplement was filed in connection with a public offering of Shopify’s Class A subordinate voting shares (the “Offering”). The Preliminary Supplement has been filed with the securities regulatory authorities in each of the provinces and territories of Canada, except Québec. The Preliminary Supplement has also been filed with the U.S. Securities and Exchange Commission (the “SEC”) as part of Shopify’s registration statement on Form F-10 (the “Registration Statement”) under the U.S./Canada Multijurisdictional Disclosure System.

A total of 1,180,000 Class A subordinate voting shares will be offered by Shopify for sale under the Offering, which will be led by Citigroup, Credit Suisse and Goldman Sachs & Co. LLC (the “Underwriters”).Shopify will grant the Underwriters an over-allotment option to purchase up to an additional 15% of the Class A subordinate voting shares to be sold pursuant to the Offering (the “Over-Allotment Option”). The Over-Allotment Option will be exercisable for a period of 30 days from the date of the final prospectus supplement relating to the Offering. Allen & Company LLC is acting as special advisor to the Company with respect to the Offering.

Shopify expects to use the net proceeds from the Offering to strengthen its balance sheet, providing flexibility to fund its growth strategies.

Closing of the Offering will be subject to a number of closing conditions, including the listing of the Class A subordinate voting shares to be issued under the Offering on the NYSE and the TSX.

No securities regulatory authority has either approved or disapproved the contents of this news release. This news release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any province, state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such province, state or jurisdiction. The Preliminary Supplement, the Base Shelf Prospectus and the Registration Statement contain important detailed information about the Offering. A copy of the Preliminary Supplement and Base Shelf Prospectus can be found on SEDAR at www.sedar.com and EDGAR at www.sec.gov, and a copy of the Registration Statement can be found on EDGAR at www.sec.gov. Copies of these documents may also be obtained from Citigroup, c/o Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood, NY 11717, Telephone: 1-800-831-9146; Credit Suisse Securities (USA) LLC, Attention: Prospectus Department, Eleven Madison Avenue, 3rd floor, New York, NY 10010, Telephone: 1-800-221-1037 or e-mail: usa.prospectus@credit-suisse.com; Credit Suisse Securities (Canada), Inc., Attention: Olivier Demet, 1 First Canadian Place, Suite 2900, Toronto, Ontario M5X 1C9, Telephone: 416-352-4749 or e-mail: olivier.demet@credit-suisse.com; or Goldman Sachs & Co. LLC, Attn: Prospectus Department, 200 West Street, New York, NY 10282, telephone: 866-471-2526, facsimile: 212-902-9316 or email: prospectusny@ny.email.gs.com. Prospective investors should read the Preliminary Supplement, the Base Shelf Prospectus and the Registration Statement before making an investment decision.

About Shopify

Shopify is a leading global commerce company, providing trusted tools to start, grow, market, and manage a retail business of any size. Shopify makes commerce better for everyone with a platform and services that are engineered for reliability, while delivering a better shopping experience for consumers everywhere. Shopify powers over 1.7 million businesses in more than 175 countries and is trusted by brands such as Allbirds, Gymshark, Heinz, Staples Canada and many more.

We were proudly founded in Ottawa, Canada, but prefer to think of the company location as Internet, Everywhere. Shopify is a company of and by the internet, and we have physical outposts around the world. The archaic newswire system doesn’t allow us to acknowledge this fact, so we will henceforth keep this paragraph in our press releases until technology improves.

Forward-looking Statements

This press release contains forward-looking information and forward-looking statements within the meaning of applicable securities laws (“forward-looking statements”) including statements regarding the proposed Offering, the terms of the Offering and the proposed use of proceeds. Words such as “expects”, “continue”, “will”, “plans”, “anticipates” and “intends” or similar expressions are intended to identify forward-looking statements.

These forward-looking statements are based on Shopify’s current expectations about future events and financial trends that management believes might affect its financial condition, results of operations, business strategy and financial needs, and on certain assumptions and analysis made by Shopify in light of the experience and perception of historical trends, current conditions and expected future developments and other factors management believes are appropriate. These projections, expectations, assumptions and analyses are subject to known and unknown risks, uncertainties, assumptions and other factors that could cause actual results, performance, events and achievements to differ materially from those anticipated in these forward-looking statements. Although Shopify believes that the assumptions underlying these forward-looking statements are reasonable, they may prove to be incorrect, and readers cannot be assured that the Offering discussed above will be completed on the terms described above. Completion of the proposed Offering is subject to numerous factors, many of which are beyond Shopify’s control, including but not limited to, the failure of customary closing conditions and other important factors disclosed previously and from time to time in Shopify’s filings with the SEC and the securities commissions or similar securities regulatory authorities in each of the provinces or territories of Canada. The forward-looking statements contained in this news release represent Shopify’s expectations as of the date of this news release, or as of the date they are otherwise stated to be made, and subsequent events may cause these expectations to change. Shopify undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.

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