Marijuana Producer Faces Shareholder Lawsuit After Sales Plummet
The investor lawsuit said Aurora Cannabis never gave any hint in public statements that it expected a substantial decrease in sales, nor indicated it planned to pause construction at two sites.
November 22, 2019 at 04:53 PM
3 minute read
Marijuana producer Aurora Cannabis was hit with a shareholder class action lawsuit in New Jersey federal court Thursday after analysts were caught off guard by plummeting sales.
The Canadian company, which began trading on the New York Stock Exchange in October 2018, has operations in 24 countries. Aurora and Coca-Cola announced in September that they were studying the market for cannabis-infused beverages. But on Nov. 14 Aurora said its sales had fallen 25% and marijuana sales to consumers fell 33% in the three months ending on Sept. 30.
The company also said it was halting spending on construction of production facilities in Alberta, Canada, and Odense, Denmark. That came six weeks after the company made optimistic statements about the completion of those facilities.
The investor lawsuit, filed by Laurence Rosen of the Rosen Law Firm, says Aurora never gave any hint in public statements of a substantial decrease in sales before the Nov. 14 announcement.
The lawsuit also claims the company made "materially false and misleading statements" during that period under the Securities Exchange Act of 1934. The suit seeks to recover damages on behalf of parties who acquired Aurora stock between Sept. 11 and Nov. 14.
The lawsuit also names CEO Terry Booth, President Stephen Dobler, CFO Glen Ibbott, COO Cam Battley and Executive Chairman Michael Singer as defendants. Each of the individual defendants "was aware of or recklessly disregarded the fact that the false and misleading statements were being issued concerning the company," the suit said.
Aurora said in a 40-F report filed with the U.S. Securities and Exchange Commission on Sept. 11 that revenue from cannabis sales to consumers had grown 52% between the third and fourth quarters of 2019, according to the lawsuit. And on Oct. 3, the company issued a press release saying its production facilities in Canada and Denmark were nearing completion.
But those statements were "materially false and misleading" because they misrepresented facts known to the defendants or recklessly disregarded them, the suit said. The complaint cited Aurora's failure to disclose that revenue would decline in the quarter ending Sept. 30, and failed to say it would halt construction at its two new facilities. As a result the defendants' statements about their business, operations and prospects were "materially false and misleading and/or lacked a reasonable basis," the suit claims.
Aurora and Rosen also did not respond to a request for comment.
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