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Report On Business Marijuana firm Aphria meets with TSX in wake of sector review

Aphria's medical marihuana plants are seen in the company’s greenhouse in Leamington, Ont.

GEOFF ROBINS/The Globe and Mail

Aphria Inc., a Canadian cannabis company with investments in the United States, says it met with officials from the Toronto Stock Exchange last Friday, days after the TSX threatened to delist companies that violate U.S. federal drug laws.

The TSX said last week that it is initiating a review of marijuana stocks listed on its exchange. The goal is to identify issuers that operate in the U.S. marijuana market by the end of 2017. Then it will determine which ones are doing so in violation of U.S. federal law and the TSX's listing requirements. If those companies do not move to comply, they could see their shares halted, suspended or delisted from the marketplace.

But the legal framework in the U.S. is murky. Even though cannabis is federally illegal, many states have eased restrictions and legalized the drug in some form. Aphria has assets that have medical licences to grow and sell cannabis in two of these states: Arizona and Florida.

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In a press release early on Monday, Aphria said it is working with the TSX in light of the exchange's recent policy guidance. It also clarified that the TSX hasn't put its stock under review at this time.

"To be clear, Aphria has not received notice from the TSX of a continued listing review," said Vic Neufeld, chief executive officer at Aphria, in the press release. "We remain a TSX-listed company and are pleased that they are open to continuing a dialogue with us."

In recent months, Leamington, Ont.-based Aphria has emerged as the poster child for TSX-listed marijuana companies that do business south of the border. It is a well-known producer with a market cap of almost $1-billion.

Last week, the company also announced it was raising more than $80-million through an equity bought deal. It says this is the largest equity offering by a cannabis company in the Canadian market. Its shares are being sold at $7.25 apiece.

Shares of Aphria tumbled last week after the TSX issued its policy notice, as investors questioned the future of Aphria's TSX listing and digested the stock sale.

From last Tuesday to Thursday, its stock fell $1.42, or 18 per cent. But on Friday, it rose 44 cents, or 7 per cent, ending the week at $6.94.

If Aphria doesn't divest its U.S. assets to satisfy the TSX, it has other places to list its stock. It can list its shares on another market in Canada or relocate to a venue outside Canada. The Canadian Securities Exchange is accepting cannabis firms with U.S. exposure as long as they disclose what's required of them by Canada's securities regulators.

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