EnforcementNewsStocksUSTrulieve Cannabis investors have been hoodwinked twice: court case

A company that reported Trulieve mislead investors is being sued for libel
Michelle Gamage Michelle GamageFebruary 27, 202010 min

A court case involving Trulieve Cannabis Corp. (CSE: TRUL and OTCQX: TCNNF) and a research company accused of manipulating stocks for its own financial gain is reaching an important deadline Friday.

Investors frustrated with their losses after buying Trulieve stocks have till the end of the week to join a class action lawsuit against the company for misleading them. But that’s a class action lawsuit Trulieve says is based on a libellous report released by Grizzly Research Llc — a business that produces “differentiated research insights” on publicly traded companies — which intentionally trashed Trulieve’s reputation to drive company stock prices down for Grizzly’s own financial gain.

The class action lawsuit against Trulieve is built off of a Grizzly report published Dec. 17, 2019, which claimed Trulieve had been caught breaking several laws and hiding unappealing aspects of the company from the public.

In response Trulieve has launched a lawsuit for libel Jan. 10, 2020, against Grizzly, which the cannabis company says will help recoup losses and discourage companies from using slander to manipulate stock prices.

Report alleges the cannabis company hid how it was being investigated by the FBI

At first glance, the 26-page report from Grizzly Research looks like an investor’s worst nightmare.

The report alleges Trulieve hid how it was under investigation from the FBI, engaged in nepotism when the CEO hired her husband’s company as the lead construction contractor, and lied when it told investors its premium cannabis bound for sales was grown in a state-of-the-art indoor facility.

Using drones to capture picture of the grow sites, Grizzly reported Trulieve was growing most of its weed in hoop houses, or low-budget greenhouses. “We believe that Trulieve has been supplementing is not getting most of their marijuana supply from these low-quality outdoor production hubs,” the report reads. 

Apparently, the reports are meant to be taken with a grain of salt, however. On the company’s disclaimer page it reads, “All reports and all statements contained herein are the opinions of Grizzly Research, and are not statements of fact.”

On the about page of its website, Grizzly says its staff are “biased” in their views, and that they and their affiliates may have long or short positions in the companies they write about.

Read more: American investors suing Sundial Growers for falsely advertising itself 

Read more: Metro Vancouver poised to draft controversial cannabis emissions bylaws 

On the same day the damning report was released, Trulieve issued a statement calling the report false, slanderous and misleading. It also accused Grizzly of short-selling. 

Short sellers are investors who borrow a security and sell it on the open market with the intention of buying it back later for less money, which means they profit when stocks take a nose dive. 

Trulieve also pressed charges against Grizzly for trespassing on its property while capturing drone footage. 

“We ask that our investors be aware that the report reflects the opinions of an acknowledged short seller, whose sole interest is in profiting from a decline in the price of the company’s shares,” Trulieve CEO Kim Rivers said in a statement last December. “I have full confidence in our management team and their abilities to continue to serve our customers without being distracted by these baseless allegations.”

When the report was published Trulieve’s share price slumped to $13.67 per share, down from $15.69 per share the day before. At press time the company’s shares were worth $13.06 each. 

Grizzly Research gets sued for libel

Trulieve also published a report that addressed some of the main allegations in raised by Grizzly, like where and how it grows its cannabis. Weed destined for oil extraction is grown in the company’s 1.1 million square feet of greenhouses but all smokable flower products are harvested from indoor cultivation facilities, the company said. 

In January Trulieve announced it was suing Grizzly for libel. 

Trulieve says the lawsuit is designed to help it recoup its losses as well as protect the industry from predatory behaviour like short selling. 

“We will work tirelessly to fight back against these fraudulent claims in a legal setting,” Rivers said in a second press release. “The truth matters deeply to the Trulieve team, and we are proud to champion honesty in our industry and hopefully prevent this firm from using slander in an attempt to manipulate stock prices in the future.” 

In response to the looming class action lawsuit from shareholders, Trulieve said it will vigorously defend itself against “this and any other frivolous suit brought against the company as a result of the Grizzly report.” 

Top image via Deposit Photos. 

 

michelle@mugglehead.com

@missmishelle

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