The Rise of Class Action lawsuits Against Cannabis Companies

Class Action Lawsuits Against Cannabis Companies Increase by 116%

Since legalization, many cannabis companies in Canada saw a rise in their stock price and interest from investors, but recent legal battles have slowed down the growth tremendously.

cannabis companies

In recent news, some of Canada’s biggest growers (cannabis companies) of cannabis have faced proposed U.S. class action suits following the sharp loss of funds in the stock market for investors.

It has been reported that at least nine U.S. law firms have put forward a petition for a class action in U.S. courts against cannabis companies like Canopy Growth, Cannabis Aurora, and Hexo Corp; three major Canadian cannabis growers. Although the charges differ from case to case. They include the disclosure of false product details and the distortion of the sales potentials.

market data
Goodwin Law Report

This comes at the heel of the turmoil that has transpired in the cannabis industry this year. The jump in stock prices during legalization has since fizzled down and has not lived up to the investor’s expectations. Aurora, for example, has seen its stock price plummet from $11.95 on May 6 2019 to $1.00 on May 4 2020. There are many factors that have lead to lawsuits taking place. Most claims include some form of misleading or withheld information from the investors.

stock price
Aurora Stock Price as of May 4th, 2020

The average price of legal weed rose to $10.30 per gram, versus $5.73 per gram for black-market marijuana. According to crowdsourced data gathered by the government agency and published last month. Those figures represent prices from October through December 2019. Across Ontario, delays across opening new dispensaries can also play a role.

The future of the cannabis industry in Canada currently does not look too bright. Even for the companies that win their cases. The damage to their reputation has already been done and will deter future investors from investing.