(CN) – Greenlane Holdings, one of North America’s largest sellers of cannabis accessories and liquid nicotine products, has been hit with a securities class action alleging the company and underwriters misled the public about its April 2019 initial public offering by withholding crucial information about a key supplier.
Lead plaintiff Andrew Gouzoulis sued Boca Raton-based Greenlane Holdings, its executive officers, and several underwriters including Canaccord Genuity LLC and Roth Capital Partners, in the 15th Judicial Circuit Court for Palm County Florida, following the company’s IPO on April 23, 2019, that offered 6.9 million shares at $17 a piece.
The lawsuit alleges that the registration statement for the IPO, which raised more than $100 million, intentionally contained “many misrepresentations” about the company’s relationship with e-cigarette giant and Greenlane supplier JUUL Labs. While the statement warned of potential risks and issues that could affect the company post-IPO, it allegedly failed to disclose that the same risks already happened before the IPO.
“Moreover, the registration statement emphasized how Greenlane’s relationship with JUUL was central to its success,” the complaint states.
Meanwhile, the cities of San Francisco, Chicago and New York joined forces to curtail the sale of e-cigarette products not approved by the U.S. Food and Drug Administration (FDA), including products manufactured by JUUL. On June 18, 2019, San Francisco became the first major U.S. city to ban e-cigarette products and endorsed a ban on the manufacturing of e-cigarette products on city property in an effort to end vaping by teenagers.
The ban, which the lawsuit says Greenlane executives knew was in progress before it was announced, caused the company’s stock to eventually fall over 60 percent from the IPO price of $17 to $6.65 per share. With a direct financial hit to Greenlane, JUUL and similar companies in San Francisco now require FDA approval before their products can reach the market.
Investors are represented by Jack Reise of Robbins Geller Rudman & Dowd LLP in Boca Raton, Fla., with Thomas L. Laughlin, IV and Jonathan M. Zimmerman of Scott+Scott Attorneys At Law LLP in New York.