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Calgary-based licensed cannabis producer Sundial Growers failed to disclose its products’ contamination problems prior to going public on the stock market, a class-action lawsuit contends.

A complaint filed Sept. 25 under the name of plaintiff and company investor Yimin Huang said that defendants, including board member and former University of Calgary president Elizabeth Cannon, were in New York City on Aug. 1 to mark the company’s shares being listed on the NASDAQ.

“The registration statement represented that Sundial was a producer of ‘high-quality cannabis in small batches’ and that ‘we produce high-quality, consistent cannabis’ and that the Company’s operating model results in ‘strong customer loyalty,’” reads the complaint.

“These representatives were untrue statements of material fact because, before the IPO, due to material quality issues, Zenabis Global Inc., a Sundial customer, had returned or rejected a total of 554kg of cannabis to Sundial.”

The suit, filed by U.S.-based legal firm Rosen Law, said the cannabis worth $2.25 million was returned to Sundial by Vancouver-based Zenabis because it was visibly mouldy and contained pieces of rubber gloves, among other foreign material.

The suit states those facts also weren’t disclosed during a promotional road show in Toronto meant to attract investors and that the value of Sundial stock “has fallen substantially below its IPO price, damaging Plaintiff and Class members.”

Also named as defendants in the action are Sundial CEO Torsten Kuenzlen, CFO James Keough, Edward Hellard, executive chairman of the company’s board, and board members Greg Mills, Gregory Turnbull and Lee Tamkee. Also named are the company’s underwriters.

The complaint says there are likely thousands of people affected by the failure of Sundial to disclose the product return.

The plaintiff is seeking a jury trial and none of the allegations have been proven in court.

Sundial has responded to the allegations, denying them and stating it would defend itself.

Sundial has been rapidly expanding its production and employment numbers since the legalization of recreational cannabis nearly a year ago.

Late last year, one of its grow spaces sustained a small electrical fire that led operators to eliminate four rooms’ worth of production as a quality precaution.

Source: https://calgaryherald.com/cannabis/cannabis-business/alberta-cannabis-producer-sundial-targeted-in-class-action-suit

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