Canopy Growth Corp.’s (CGC) Accused of Misleading Shareholders
According to the complaint for alleged violations of the Securities Exchange Act of 1934 between June 21, 2019 and November 13, 2019, in June 2019, Canopy Growth Corp. filed its Form 6-K with the SEC, touting fourth quarter 2019 sales of CA$42.5 million and fiscal year 2019 sales of CA$85.3 million from its cannabis oils and softgel capsules, noting that “[o]il and softgel capsules accounted for 40% of gross revenue in the fourth quarter of fiscal ’19.” Then, in August 2019, Canopy released first quarter 2020 cannabis oil and softgel sales of only CA$0.2 million. However Canopy’s CEO assured investors that its “oils and softgel products remain exceptionally popular.” Despite these assurances, in reality, Canopy was experiencing weak demand for its softgel and oil products. As a result, on November 14, 2019, Canopy issued a press release announcing an “astounding” larger-than-expected loss for the quarter, and a CA$32.7 million restructuring charge to modify its retail pricing architecture. On this news, Canopy’s share price fell $2.36, or nearly 14.4%, to close at $15.84 per share.
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