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Canopy Growth Corporation Class Action Lawsuit

Case Summary

Company Name
Canopy Growth Corporation
Stock Symbol
CGC
Class Period
June 21, 2019 to November 13, 2019
Court
District of New Jersey

On November 20, 2019, the Canopy Growth Corporation class action lawsuit was filed charging Canopy Growth and certain of its officers with violations of the Securities Exchange Act of 1934. The Canopy Growth class action lawsuit was commenced in the District of New Jersey on behalf of purchasers of Canopy Growth securities between June 21, 2019 and November 13, 2019 (the “Class Period”) and is captioned Ortiz v. Canopy Growth Corporation, et al., No. 19-cv-20543.

Canopy Growth, together with its subsidiaries, produces, distributes, and sells cannabis in Canada.  Canopy Growth offers distinct brands and curated cannabis varieties in dried, oil, and Softgel capsule forms, as well as medical devices through one of its subsidiaries. 

The Canopy Growth securities class action lawsuit alleges that during the Class Period, defendants failed to disclose that Canopy Growth was experiencing weak demand for its Softgel and oil products and, as a consequence, Canopy Growth would be forced to take a CA$32.7 million restructuring charge due to poor sales, excessive returns, and excess inventory.  As a result of this information being withheld from the market, Canopy Growth shares traded at artificially inflated prices of more than $40 per share during the Class Period.

On November 14, 2019, before the market opened, Canopy Growth announced its earnings for the second fiscal quarter of 2020, posting a larger than expected loss.  In addition, Canopy Growth announced it would be modifying its retail pricing architecture and taking a restructuring charge of CA$32.7 million for “returns, return provisions, and pricing allowances primarily related to its softgel & oil portfolio.”  Canopy Growth also stated that “management has recorded an inventory charge of $15.9 million to align the portfolio with the new strategy,” which includes “new retail pricing architecture, a rationalized package assortment, and a focused marketing/educational strategy to further develop this category.”  One analyst described the disclosures as “astounding,” writing that he did “not consider this type of adjustment to be one-time, as it reflects returns and new pricing architecture and package assortment going forward.”  On this news, the price of Canopy Growth shares fell nearly 14%.

Robbins Geller Rudman & Dowd LLP is one of the world’s leading law firms representing investors in securities class action litigation.  With 200 lawyers in 9 offices, Robbins Geller has obtained many of the largest securities class action recoveries in history.  For seven consecutive years, ISS Securities Class Action Services has ranked the Firm in its annual SCAS Top 50 Report as one of the top law firms in the world in both amount recovered for shareholders and total number of class action settlements.  Robbins Geller attorneys have helped shape the securities laws and have recovered tens of billions of dollars on behalf of aggrieved victims.  Beyond securing financial recoveries for defrauded investors, Robbins Geller also specializes in implementing corporate governance reforms, helping to improve the financial markets for investors worldwide.  Robbins Geller attorneys are consistently recognized by courts, professional organizations and the media as leading lawyers in the industry.

Class Period: June 21, 2019 - November 13, 2019
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