This Cannabis Company Is Facing Class Action Lawsuit For Overstating Its Subsidiary's Revenue

Pomerantz LLP announced that a class action lawsuit has been filed against Canopy Growth Corporation CGC, and certain officers. The class action, is on behalf of a class consisting of all persons and entities other than defendants that purchased or otherwise acquired Canopy Growth securities between June 1, 2021 and May 10, 2023, inclusive.

The complaint alleges that, throughout the class period, defendants made materially false and misleading statements regarding the company’s business and/or failed to disclose that:

• issues with Canopy Growth’s BioSteel business, including, inter alia, aged inventory and overspending, had been significantly hampering the company’s profitability;

• there were material weaknesses in the company’s internal controls over accounting and financial reporting;

• as a result, the company improperly booked sales of its BioSteel business unit;

• as a result, the company’s revenue was overstated;

• and as a result of the foregoing, defendants’ positive statements about the company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis.

On February 9, 2023, before the market opened, Canopy Growth announced its financial results for the third quarter of the company’s fiscal year 2023. Among other results, revealing earnings per share of -CA$0.54, missing consensus estimates by CA$0.31, and revenue of CA$101.2 million ($77 million), representing a year-over-year decrease of 28.2% and missing consensus estimates by CA$15.16 million. On this news, Canopy Growth’s common share price fell $0.47 per share, or 17.15%, to close at $2.27 per share on February 9, 2023.

On May 10, 2023, after the market closed, Canopy Growth announced that its audited consolidated financial statements for the fiscal year ended March 31, 2022 and the quarters ended June 30, 2022, September 30, 2022, and December 31, 2022 should no longer be relied upon, and would need to be restated. The company also disclosed that it “identified certain trends in the booking of sales by the [BioSteel] business unit for further review.” On this news, Canopy Growth’s common share price fell $0.18 per share, or 14.8%, to close at $1.04 per share on May 11, 2023, on unusually heavy trading volume.

Photo: Benzinga edit with photos by AJEL and lindsayfox on Pixabay