Tilray stock is sinking today after it emerged that the Canadian cannabis firm was being sued for breach of contract after terminating a C$110 million deal to buy 420 Investments Ltd.
Tilray Pulls the Plug
Tilray Inc (NASDAQ:TLRY) initially announced plans to purchase the private Alberta-based cannabis retailer back in August for $110 million in a cash and stock deal. The deal—which was reached after five months of negotiations between the two companies—included C$40 million in Tilray promissory notes based on future store openings, according to the statement of claim. Both firms confirmed the statement of claim had been filed last Friday, with Tilray accused of dragging its feet on the deal following a “change of heart.” Tilray stock is down 22% since.
“In consequence, the defendants have not proceeded diligently under the arrangement agreement and are breaching the arrangement agreement by failing to take reasonable or timely steps to obtain the regulatory approvals needed to close the transaction,” read the statement of claim. A letter obtained by BNN Bloomberg from Four20 Chief Executive Officer Geoff Gobert shows that he argues Tilray did not receive the required approval from Alberta Gaming, Liquor & Cannabis for the transaction, and so pulled the plug on the deal instead.
Tilray shares are currently trading for $14.95.
Huge Correction in Tilray Stock
Tilray disputes the accusations made by 420 Investments and said it intends to vigorously defend itself. “Certain conditions precedent to closing the acquisition of 420 Investments could not be satisfied by Four20,” said spokesperson Chrissy roebuck. “On that basis, Tilray made the business decision to terminate the agreement. We have acted within our rights through every step of the process and we are confident in our position to terminate.”
The termination of cannabis acquisitions has been a common theme over the last 12 months as the industry grapples with a litany of issues. Tilray stock has felt the pinch as heavily as any other firm on the market, correcting from a pre-legalization value of nearly $215 to today’s price of just under $15.
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