Namaste Technologies (N.V), cannabis’ favourite red-headed stepchild, hasn’t been having the best run lately, and being ordered to pay nearly USD$5M in cross-border settlements is just the chef’s kiss.
$2.15 million US will be paid to settle all claims in the Canadian action and $2.75 million US will be paid to settle all claims in the US action. Namaste’s contribution to the settlement amounts, which are principally being funded by Namaste’s insurance, will be less than $500,000 US. The settlements are made without any admission or finding of liability and are subject to court approval.
“We’re on track to becoming the world’s most customer-focused cannabis marketplace, and this settlement is a win-win for Namaste shareholders and business partners alike,” said Meni Morim, Namaste’s interim CEO.
To reiterate, Namaste’s legal troubles started in 2018 after allegations of securities violations in the U.S.
According to the lawsuit, Namaste either made false and misleading statements and failed to disclose that:
- Namaste had sold its wholly-owned U.S. subsidiary to Namaste executives;
- Namaste did not sell its U.S. subsidiary in an arm’s length transaction;
- As a result, the defendants’ statements about the Namaste’s business, operations, and prospects “were materially false and misleading and/or lacked a reasonable basis at all relevant times. When the true details entered the market, the lawsuit claims that investors suffered damages”;
- And that man buns are still a felonious offence in the year 2019.
OK, that last part wasn’t part of the lawsuit, but if it was, Namaste would be forking over a lot more than USD$5M.
Namaste is up 8% on today’s news, and I suppose not having to admit guilt or wrongdoing is good. Plus, their insurance will be covering most of the damages, but I mean come on.
Are we still talking about these guys like they’re serious players? Revenue shrunk between Q1 2018 and Q1 2019. How does one manage that? Rec cannabis wasn’t even legalized in Q1 2018.
Last I checked, “Namaste is a premium, adult-use, recreational brand of cannabis products developed with you in mind.”
How this all started
In October 2018, a blockbuster report published by Citron Research refuted two central claims by Namaste management and helped launch the class-action lawsuit. The report pointed to former CEO Sean Dollinger’s claims that Namaste would be listed on the NASDAQ.
It also claimed to have uncovered self-dealing by Namaste management. Citron found documents which indicated Namaste sold an asset to a company executive after Dollinger claimed the transaction was arm’s length.
As a result, RM LAW P.C., released a press release which featured this statement:
On October 4, 2018, Citron Research (“Citron”) published an article entitled “Namaste: Citron has exposed complete FRAUD that underpins the ‘Business’ of Namaste,” stating that the Company had entered into an “undisclosed related party” transaction. The Citron report alleged, among other issues, that Namaste’s Chief Executive Officer had falsely “promised investors as Nasdaq listing” and had falsely represented that Namaste had divested the Company of its U.S. assets in a sale to an “arm’s length” purchaser, when the purchaser was in reality a Namaste executive.
What else is there to say?
Equity.guru’s Chris Parry said it all in his July 18 piece on Namaste’s most recent financials.
The website for Namaste’s New Zealand vape operations has been suspended. Their Israeli operations have gone nowhere, U.S. revenue is down, there is an investigation into their Brazillian operations by a local regulatory agency… need I say more?
Oh wait, then there’s this little tidbit with Supreme Cannabis (FIRE.T), a client of ours and a largely beloved player in the cannabis space. Find me someone with something negative to say about John Fowler and his team–can’t be done.
CannMart Inc. entered into a definitive supply agreement with 8528934 Canada Ltd. d/b/a 7ACRES (“the seller”) dated January 24, 2018 under which it committed to purchase a minimum annual quantity of 1,000 kilograms of premium dried cannabis flower at $6 per gram within the calendar year 2018.
The Company is currently disputing its obligations to the seller under the definitive supply agreement and the amount payable thereunder remains uncertain at this time.
Namaste is currently sitting at $0.53 per share. The company has a ton of cash in the bank, and growth through M&A is always an option, but you’ve got to be asking yourself what the upside is at this point.
I know I am, and I get paid to think about this.
Full disclosure: Supreme Cannabis is an equity.guru marketing client.Disclaimer: ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.