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Althea share price crushed after Aphria dumps 37 million shares

The Althea Group Holdings Ltd (ASX: AGH) share price has come under pressure today.

In early trade the cannabis company’s shares have crashed 22% lower to 41 cents.

Why is the Althea share price being crushed?

This morning Althea provided an update on its prescription growth and a major share sale by cannabis giant Aphria.

In respect to its prescription growth, Althea is on track to reach 4,000 patients by the end of the year. This is after the company reached 2,705 patients that have now been prescribed Althea medicinal cannabis products. Which is a 16% increase on the end of September.

Althea also reported an increase in Healthcare Professionals (HCPs) across Australia who have prescribed its products. This has lifted to 348 so far in October.

One of the key drivers of this growth has been the Queensland government’s decision to improve patient access to medicinal cannabis by removing their state-based application process. Pleasingly for the company, the New South Wales Ministry of Health has since followed suit.

Althea CEO Josh Fegan said: “Althea believes that given the TGA’s comprehensive regulatory system for medicinal cannabis at a Commonwealth level, other states including Victoria, will soon follow the lead of Queensland and New South Wales by removing state-based applications for patients seeking access to medicinal cannabis. This will certainly lead to wider acceptance of medicinal cannabis treatment within the medical community and we believe will significantly increase Althea’s patient base.”

The bad news.

But it isn’t all good news. Worryingly, this morning the company revealed that cannabis giant and substantial shareholder, Aphria, intends to sell almost 37 million non-escrowed shares. This is the equivalent of 15.7% of the company’s issued capital.

According to the release, Aphria has agreed to offload its shares at 40 cents per share. This is a massive ~24% discount to the last close price. Aphria will continue with its supply agreement and provide Althea with product up to the year 2027.

Interestingly, this is the second time this month that a cannabis giant has dumped its holding in one of the locally listed pot stocks. 

In the middle of the month Canopy Growth Corp sold 42.08 million shares in Auscann Group Holdings Ltd (ASX: AC8) for just 15 cents per share.

Should you invest?

I’m not convinced that any of the locally listed cannabis companies will ever generate a meaningful level of revenue that makes them worthy of investment. And judging by these shares sales, it looks as though the management teams of the world’s biggest cannabis companies agree. If they didn’t, I’m sure they would hold onto their shares.

In light of this, I think investors should stay well clear of the industry and focus on other areas of the market.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.