What Aphria’s Move From the NYSE to the NASDAQ Means for Stock Investors

In an unexpected move on Tuesday, one of Canada’s largest marijuana firms Aphria (TSX:APHA)(NYSE:APHA) announced that it is moving its U.S. stock listing from the New York Stock Exchange (NYSE) to the Nasdaq Global Select Market effective on Monday, June 8.

Aphria’s stock listing migration will take place soon after the firm closes its fiscal year 2020 financial books on May 31, and the motivation appears to be mainly financial.

Financial considerations in Aphria stock migration

“This move is a reflection of our ongoing commitment to find cost-effective ways of operating…” the company’s CEO Irwin D. Simon commented in the Tuesday press release. I’m in agreement. The NYSE is one of the oldest and most prestigious exchanges in the world, but annual listing costs on this exchange are very expensive.

The minimum annual fee for a continued listing on the NYSE is US$71,000 (CA$98,000) in 2020. However, billing is done on a per-share basis, and the per-share charge is US$0.00113 in the calendar year 2020. Aphria has over 286,004,529 in shares outstanding. It’s most likely that the company was expected to pay over US$323,000 (or CA$449,000) to the NYSE this year. Fees usually escalate every year.

In comparison, the NASDAQ fees are in bands depending on the number of listed shares. APHA’s shares fall in the “above 150 million” category, and the company could pay NASDAQ some US$159,000 (CA$221,000) annually.

Therefore, the company could save more than $228,000 in annual listing expenses by shifting to the NASDAQ. The cost savings represent 4% of last quarter’s adjusted EBITDA.

Propping up an ESG score?

Interestingly, the company’s management believes that the “NASDAQ will be a good fit” for the company given its focus on integrating good environmental, social, and governance (ESG) principles across its business processes.

Regrettably, marijuana has been stigmatized for decades in North America. It’s amusing that a perceived “sin” stock is pitching about ESG smartness to the investing community. Perhaps ESG-sensitive investors will listen to Mr. Simon’s pitch.

That said, the NASDAQ is indeed a home to the world’s largest, innovative, and most profitable cash flow rich firms that include Apple, Microsoft, Amazon, and Facebook. No doubt, these are some of the best ESG stocks to own for fund managers who are sensitive to ESG scores on individual holdings.

Notably, a majority of NASDAQ-listed firms are conscious of ESG issues, and Aphria will soon be counted among them.

Does this change Aphria’s stock valuation?

Perhaps the annual listing cost savings are too small for a $1.5 billion firm to justify the move. However, Canadian marijuana growth stocks need all the cost savings available to them right now.

Cannabis investor focus has shifted from parabolic sales growth rates to positive operating earnings and cash flow generation. If small cost savings on annual listing fees can help the company boost its profitability metrics towards an elusive adjusted EBITDA goal, then a NASDAQ move is welcome.

Most noteworthy, ESG investing is fast becoming an integral aspect of asset selection in many institutional investing portfolios. Norway’s US$1 trillion wealth fund recently blacklisted some Canadian oil sands securities for their unacceptable greenhouse gas emissions.

That said, the firm will not significantly boost its share price just by looking cosmetically greener today. However, the cannabis industry’s carbon footprint does need attention. APHA’s management is highlighting an important qualitative investing and global sustainability issue.

Most noteworthy, to anyone who remembers Aphria’s late 2018 scandal, the company’s mention of ESG sounds like a commitment to corporate governance best practices … and that calms many investors’ nerves. However, this doesn’t mean that NYSE-listed firms rank lower than their NASDAQ counterparts on corporate governance quality.

The 10 Best Stocks to Buy This Month

Renowned Canadian investor Iain Butler just named 10 stocks for Canadians to buy TODAY. So if you’re tired of reading about other people getting rich in the stock market, this might be a good day for you.
Because Motley Fool Canada is offering a full 65% off the list price of their top stock-picking service, plus a complete membership fee back guarantee on what you pay for the service. Simply click here to discover how you can take advantage of this.

Click Here to Learn More Today!

More reading

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Fool contributor Brian Paradza has no position in any of the stocks mentioned. David Gardner owns shares of Amazon, Apple, and Facebook. Tom Gardner owns shares of Facebook. The Motley Fool owns shares of and recommends Amazon, Apple, Facebook, and Microsoft and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, short January 2022 $1940 calls on Amazon, and long January 2022 $1920 calls on Amazon.

The post What Aphria’s Move From the NYSE to the NASDAQ Means for Stock Investors appeared first on The Motley Fool Canada.

Source: The Fool
What Aphria’s Move From the NYSE to the NASDAQ Means for Stock Investors
The Fool

The Motley Fool
Contributor at mjcanada.ca
The Motley Fool is dedicated to helping the world invest — better. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, mutual funds, and premium investing services.

In all we do, we take a different approach.

We believe – and have proven over decades – that the individual investor can beat the market.

We believe that anyone can do it, even if they don’t have a lot of time or money to devote to investing.

We believe in a long-term outlook, helping people build wealth over time.

We believe that the person best positioned to take care of your financial future is you.

And we work tirelessly on behalf of our hundreds of thousands of members who are enjoying the opportunities that come with having enough money to do the things that matter to them.

While we are headquartered in Alexandria, Va., The Motley Fool advocates for the individual investor around the globe with offices in the UK, Australia, Canada, Singapore, and Germany.

Related News