An investor class action against cannabis firm Aphria Inc., certain directors, officers and its underwriters, has been tentatively settled. The suit alleges that the company made misrepresentations in its disclosure regarding a pair of acquisitions in 2018.
The proposed $30 million settlement is subject to court approval, which will be considered at a hearing before the Ontario Superior Court of Justice on March 26.
The settlement seeks to resolve the case against the company and two of its directors and officers, which alleged that they made misrepresentations to investors about the acquisitions of Nuuvera Inc. and LATAM Holdings Inc. in a prospectus that was filed in June 2018.
The case, which sought $170 million in damages for investors due to the allegedly-deficient disclosure, was certified as a class action in 2022.
Aphria and the individual defendants denied all of the allegations, and the settlement stressed that the proposed resolution represents a compromise, and is not an admission of liability or wrongdoing.
According to a notice accompanying the proposed settlement, the defendants argued that there were no misrepresentations in the company’s disclosure — and that the disclosure they did provide was “reasonable,” given that the transactions took place, “at a time of rapid international growth by major cannabis companies in Canada and that there was a race to acquire assets …”
Alongside the risk that the court would side with the defence, the notice also indicated that there was a risk that Aphria would face insolvency if it was hit with a hefty damages award in the case.
“There was therefore a serious risk that Aphria would not be in the position to pay any amount of damages if the plaintiff eventually succeeded at trial,” it said.
“In light of the litigation risk, the serious risk that any judgment may not be satisfied in the event of Aphria’s threatened [insolvency] process, and the substantial delay that would result from a prolonged trial and likely appeal, class counsel believes that the settlement was the largest amount achievable under the circumstances,” it said.
In addition to approving the proposed settlement, the court will be asked to approve legal fees, which may represent a maximum 30% of the total.