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In our recent article[1] on securities litigation in the burgeoning legal cannabis industry, we noted that companies in this space must be careful and thoughtful in their disclosures to avoid securities litigation exposure. In the past month, at least three additional securities litigation complaints were filed against companies connected to the legal cannabis industry, including pre-M&A disputes in the Southern District of New York and a putative class action under the Securities Exchange Act of 1934 in the Eastern District of New York. These complaints underscore that while the legal cannabis industry may be relatively new, companies looking to pursue an M&A deal or other transactions in this space must be cognizant of securities litigation risks.

Tilray and Helix – Commonplace Pre-M&A Complaints Alleging Misstatements or Omissions in Proxy Statements

Two of the recently-filed suits involved forthcoming merger and acquisition shareholder votes.Continue Reading More Cannabis Industry Securities Suits Hit Dockets

For any company, going public is fraught with securities litigation risks. As highlighted in the recent New York State Appellate Court decision In The Matter of Sundial Growers, Inc. Securities Litigation, companies operating in the relatively new, but rapidly growing, frontier of legal cannabis must be thorough and careful when issuing public disclosures. Companies must also be aware of venue issues: in particular, the potential for simultaneous federal and state proceedings related to IPO filings following the United States Supreme Court’s 2018 Cyan decision, and should consider the adoption of Federal Forum Provisions (“FFPs”) to avoid this problem.

Sundial Growers Securities Litigation

Sundial Growers is a Canadian company which commenced cannabis production in December 2018, following legalization of adult-use cannabis in Canada. The company went public via an Initial Public Offering in August 2019.

As is common following an IPO, plaintiff, on behalf of a putative class of investors, brought a claim under the Securities Act of 1933 (the “Securities Act”) alleging material misstatements and omissions in the IPO’s registration statement that had been filed with the Securities and Exchange Commission. (“SEC”).Continue Reading Recent New York Appellate Decision Highlights That Cannabis Companies Going Public are Subject to Typical Securities Litigation Risks—and Defenses

The unlikely tale of the sub-reddit Wall Street Bets (WSB) taking on the world of institutional investing seems fit for a Adam McKay film adaptation, but the saga isn’t over yet. Enter the marijuana stocks – the epilogue at the end of the film that signals WSB’s influence may not be over (cue an ethereal cover song playing in the…
Continue Reading Getting high on their own supply: The rise and fall of marijuana stocks on Wall Street Bets

Last week, several members of Seyfarth’s cannabis practice attended CannaVest West and the Cannabis Business Summit & Expo.  Industry expert panels discussed market trends, private equity, venture capital, family offices, and banking, as well as commercial real estate, which I had the opportunity to moderate.

Of interest to TBT readers, a few key takeaways from the event include:

Investment Opportunities…
Continue Reading Cannabis Industry: The Latest Takeaways

Seyfarth Shaw LLP has released the results of its fourth annual Real Estate Market Sentiment Survey, which polled commercial real estate executives around the country from all sectors. Of interest to our readers, this year’s survey revealed that, despite the dramatic increase in the number of states legalizing marijuana, 85% of respondents are putting the brakes on investing in cannabis…
Continue Reading Survey Says…

In our June 12 blog post, we reported on a potential acquisition in the cannabis industry:

As an illustration of the potential difficulties in an acquisition by a SPAC, in July 2017 it was announced that the publisher of High Times was going to be acquired by a SPAC, Origo Acquisition Corp. The merger has yet to be consummated…

Continue Reading Origo Acquisition Corporation Secures Additional Time for High Times Merger

A developing market for owners of cannabis businesses looking for a potential buyer are SPACs, special purpose acquisition companies.  SPACs raise money in public offerings with the purpose of acquiring companies, usually in a specified range of industries or located in a particular geographic area. The SPACs cannot have a particular target in mind at the time of the public offering.  Among some of the more recent SPACs with a cannabis industry focus, MTech Acquisition Corp. closed a public offering for $57.5 million in February 2018, and Cannabis Strategies Acquisition Corp. closed a CDN $134.75 million (approximately US $103.78 million) public offering in Canada in December 2017. This post looks at some of the issues involved that are unique to being acquired by a SPAC.
Continue Reading SPACs as an Exit Strategy for Cannabis Businesses

There is a segment of the investment community that wants to invest in the cannabis industry in the worst way, and that is exactly how some are doing it.  Over the past several months our firm has reviewed a number of private placement memoranda (PPM) for clients, and while some appear to be solid and well written, others remind us of the early days of the internet boom when business plans were sometimes written on napkins.  Deficiencies we have found in PPMs include confusing descriptions of business plans, lack of financial projections, lack of basis for valuations, inadequate disclosure of risk factors and vague discussion of management compensation and/or equity holdings.

If you are planning to invest in a cannabis company, here are a few factors that you should consider before making a decision.
Continue Reading Invest in That?? What are you Smoking??

In April, we wrote about Med-X, Inc. (“Med-X”).  Med-X was the first cannabis company to launch an equity crowdfunding campaign, and as of September 16, 2016, the company has found itself in regulatory hot water for failing to adhere to securities law requirements.
Continue Reading Crowdfunding in the Cannabis Industry – Update – SEC Temporarily Suspends Med-Ex Crowdfunding Offering

As we reported last month, on October 17, 2016, Innovative Industrial Properties, Inc., a real estate investment trust (colloquially, a REIT) specializing in the acquisition, ownership and management of industrial properties leased to experienced, state-licensed operators of regulated medical use cannabis facilities, filed a registration statement with the United States Securities and Exchange Commission under which the company is offering up to 8.75 million shares at an initial public offering price of $20 per share.  The Company simultaneously filed to list its shares on the New York Stock Exchange.
Continue Reading November Surprise? NYSE Approves Industrial Innovative Properties’ Listing Application