Canopy Growth Corporation Class Action Lawsuit
- Company Name
- Canopy Growth Corporation
- Stock Symbol
- Class Period
- June 21, 2019 to November 13, 2019
- 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%.
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