Multi-state cannabis operator iAnthus Capital Holdings is facing a class action lawsuit and its stock trading on the Canadian Securities Exchange was halted for about four hours yesterday after the firm announced earlier this month that it defaulted on its interest payments.
On April 6, iAnthus said it was unable to pay interest obligations of $4.4 million on $157.5 million in debt. In a statement, the company said it was unable to make the payments due to “the decline in the overall public equity cannabis markets, coupled with the extraordinary market conditions” caused by the novel coronavirus outbreak. The firm said it had been unable to secure further financing since December 20, 2019.
CEO Hadley Ford in a statement called the default “a difficult decision” but the management team and board of directors decided it was in the best interest of the company and its stakeholders to spend cash “to maintain the inherent value” of iAnthus’ business operations.
In the April 6 announcement, the company indicated the board had convened a special committee to investigate potential conflict of interest by Ford, determine the prospects of liquidity alternatives, and renegotiate financing arrangements and contracts. The firm also hired Canaccord Genuity Corp. as a financial advisor.
“Additionally, the company will continue to pursue financing options to infuse additional cash into the business, while also exploring other strategic and financial opportunities. At present, there can be no assurance as to what, if any, alternative might be pursued by the company and there can be no assurance that the company will reach any solution with the company’s holders of the secured debentures and unsecured debentures, or as to the terms of any solution, if achieved.” – iAnthus in a press release
On Tuesday, law firm Wolf Haldenstein Adler Freeman & Herz LLP announced they had filed a federal securities class-action lawsuit against iAnthus in the United States District Court for the Southern District of New York. The complaint alleges that the cannabis company “failed to disclose that they had the ability to withhold use of the interest payment escrow or that the interest escrow payment was exhausted, diminished, or otherwise unavailable to satisfy the company’s interest payment obligations.”
The lawsuit announcement notes that iAnthus shares fell 62 percent on “unusually heavy trading volume” on the news of the default and the internal investigation into Ford.
In a news release on Wednesday, iAnthus acknowledged the 4-hour CSE stock shutdown but pointed to the April 6 release for more information. It did not comment on the reason for the halt or the pending lawsuit.
iAnthus currently operates 33 dispensaries in 11 states.
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