Leading Florida Marijuana Company Faces Securities Class Action
Trulieve is accused of deceiving shareholders about its marijuana growing procedures, insider involvement in real estate sales and profits.
January 02, 2020 at 06:25 PM
3 minute read
The original version of this story was published on New York Law Journal
One of Florida's top medical marijuana companies faces a proposed securities class action claiming it misled investors since going public in 2018.
The federal lawsuit filed Monday by Phillip Kim of The Rosen Law Firm in New York said Trulieve Cannabis Corp. deceived its investors about its marijuana-growing procedures, hid insider involvement in real estate deals and overstated corporate profits.
The suit was filed on behalf of Trulieve investors who held shares during a 15-month period ended Dec. 17, 2019, when Grizzly Research published a report detailing its concerns with Trulieve. Grizzly performs due diligence on publicly traded companies.
The suit filed Monday in the Eastern District of New York repeats some of the accusations in the Grizzly report. Grizzly concluded Trulieve was growing marijuana in "low quality hoop houses" rather than indoor facilities, Kim wrote.
A summary of Grizzly's report noted it used drones and other methods to learn Trulieve was mostly using hoop grow houses "prone to infestation and weather damage." Marijuana produced in those conditions is unlikely to keep up in the market amid increasing competition, investigators found.
Grizzly also said Trulieve was involved in a real estate transaction with the husband of CEO Kim Rivers, which led to unusual financial activity, according to the suit.
Trulieve's "wrongful acts and omissions" led investors to lose money, including a significant decline in the company's stock price when the Grizzly report was released, Kim wrote.
"Defendants acted with scienter in that they knew that the public documents and statements issued or disseminated in the name of Trulieve were materially false and misleading," he wrote.
In the filing, Kim did not say how much money the plaintiffs might be owed, but he estimated the number of plaintiffs could be in the thousands.
Trulieve, one of Florida's 22 licensed medical marijuana operators, is a vertically integrated company that grows, harvests and sells its products at dispensaries and by mail order. The company's website list 52 Florida stores, including eight in South Florida.
The company's over-the-counter shares debuted at $9.50 on Sept. 24, 2018, peaked at $14.68 last April 1, hit a December high of $13.57 and traded Friday as low as $10.77, Yahoo Finance reported.
State corporate records list Quincy as the headquarters for Trullieve Inc., and the lawsuit said Trulieve Cannabis in incorporated in British Columbia.
Trulieve had not filed a notice of appearance by Friday. Kim and Trulieve representatives did not respond to requests for comment by deadline.
The company also was sued last month by a Tennessee man claiming violations of the federal Telephone Consumer Protection Act for unsolicited text messages offering special deals on marijuana products.
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