Pomerantz has been named co-lead counsel in a securities class action against Canopy Growth Corporation concerning alleged material misstatements and omissions related to the company’s financial performance and internal controls.
Based in Canada, Canopy Growth is a leading producer, distributor, and seller of cannabis, hemp, and consumer packaged goods for both recreational and medical use. The company operates through subsidiaries and joint ventures, including prominent brands such as Tweed, Spectrum Therapeutics, Martha Stewart CBD, and BioSteel, a sports nutrition and hydration brand designed for professional athletes. The class action suit alleges that Canopy Growth issued materially false and misleading statements concerning the Company's financial performance, particularly its revenue figures, and the effectiveness of its internal controls.
Key revelations from Canopy Growth's filings with the Securities and Exchange Commission during the class period shed light on the alleged misrepresentations. The Company reported year-over-year declines in net revenue during fiscal years 2022 and 2023, citing various factors such as changes in its global cannabis segment and acquisitions. Notably, BioSteel's revenue growth was highlighted as a bright spot amid these declines, with substantial year-over-year increases reported in its financial statements.
However, subsequent disclosures by Canopy Growth raised concerns about the accuracy of its financial reporting. On May 10, 2023 Canopy Growth filed a form with the SEC in which it revealed that certain of the financial statements that the company had issued should no longer be relied upon in light of its discovery of trends in the booking of sales in its BioSteel business that warranted further review. Canopy Growth further declared that some of its financial disclosures would need to be restated. Canopy Growth's stock price plummeted by 14.8% on May 11, 2023, following these revelations.
Pomerantz’s suit alleges that Canopy Growth's positive statements about its financial performance and internal controls were materially false and misleading. It claims that the Company failed to disclose material weaknesses in its internal controls, improperly booked sales, and overstated revenue figures, thereby deceiving investors about its true business conditions and prospects. Canopy Growth CEO David Klein, CFO Judy Hong, and former CFO Michael Lee are also named as defendants in the case.
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