2018 began with a bang in the Canadian cannabis industry.
After the markets closed this past Friday, January 12, 2018, CanniMed Therapeutics Inc. (“CanniMed”), announced that it had commenced a lawsuit against Aurora Cannabis Inc. (“Aurora”) and a number of large CanniMed shareholders.
In the announcement, CanniMed indicated that the claim was for $725 million in damages resulting from the defendants’ (alleged) “unlawful actions that have negatively affected the appreciation of the value of common shares of CanniMed and prevented CanniMed from pursuing alternative change of control transactions for the benefit of the CanniMed shareholders.”
While the press release contained only high level details, the 28 page Statement of Claim provides a very detailed account of the background leading up to the proposed CanniMed – Newstrike transaction and how certain CanniMed shareholders and Directors allegedly breached confidentiality and fiduciary duties and “hijacked” the board’s process in order to kill the CanniMed – Newstrike deal and facilitate Aurora’s bid to acquire CanniMed. In fact, the Claim alleges that it was one of the locked-up shareholders who contacted Aurora and indicated that it would be prepared to support an offer from Aurora for its acquisition of the CanniMed shares.
It is also alleged that the locked-up shareholders entered into lock-up agreements with Aurora on November 12, the day before the CanniMed Board was scheduled to vote on the Newstrike transaction.
The Claim states that Aurora’s non-binding letter proposing an acquisition of CanniMed was delivered to CanniMed just one hour before the Board was scheduled to vote on the Newstrike transaction.
Of course, given that the Claim was only issued this past Friday, all of the allegations remain unproven and we have yet to hear the defendants’ side of the story. Given the allegations made in the Statement of Claim, this lawsuit will be one that the entire industry watches closely.