Aurora Cannabis is the target of a class-action lawsuit over allegations that the company “made materially false and misleading statements” regarding its business, operational, and compliance policies.
The lawsuit, filed on behalf of investors by New York-based firm Bragar Eagel & Squire, P.C., claims that from February 13 to September 4, Aurora failed to “disclose it had significantly overpaid for previous acquisitions and experienced degradation in certain assets, including its production facilities and inventory.” Further, the lawsuit contends that Aurora’s “Business Transformation Plan,” announced in February, “failed to mitigate the foregoing issues,” and that it was “foreseeable that the company would record significant goodwill and asset impairment charges.”
“As a result,” the law firm said when announcing the suit, “the company’s public statements were materially false and misleading.”
Attorneys for the class action plaintiffs point to a September 8 press release from Aurora disclosing that the firm expects “to record up to $1.8 billion in Goodwill Impairment Charges” in the fourth quarter of this year. The company also said that “previously announced fixed asset impairment charges [were] now expected to be up to $90 million, due to production facility rationalization, and a charge of approximately $140 million in the carrying value of certain inventory, predominantly trim, in order to align inventory on hand with near term expectations for demand.”
Following that release, Aurora’s stock price fell 11.63 percent – 99 cents per share – to close at $7.52 per share, the law firm said.
On February 13, Aurora reported a $980 million loss in the second fiscal quarter, with net revenues of $47.7 million – a $53.4 million decrease from the first fiscal quarter. The company also reported its international medical cannabis revenues fell sharply from about $3.8 million in Q1 to about $1.5 million in Q2.
Despite the company’s downturn, it reported that share and option-based compensation awards for six executives jumped 58 percent to $9.8 million in the 2020 fiscal year, which ended June 30. Its losses have exceeded $3 billion.
A report in April found class-action lawsuits targeting cannabis companies more than doubled from six to 13 from 2018 to 2019. Aurora was also sued in 2019 over its alleged failure to disclose it was planning to pause construction at one of its facilities, suggesting a decline in its business.
Note: All figures in US dollars.