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