On Wednesday, Tilray, Inc., Brendan Kennedy and Mark Castaneda filed a motion to dismiss the plaintiffs’ second amended complaint in the case of Kasilingam, et al. v. Tilray Inc. in the Southern District of New York.
According to the motion, Tilray is a global pioneer in what is expected to be a $150 billion cannabis industry. It further states that Tilray was the first medical cannabis producer with a Good Manufacturing Practices certified production facility in North America, the first producer to export medical cannabis to Africa, Australia, Europe and Latin America and among the first medical cannabis companies to be licensed in two countries. Additionally, the motion purports that Tilray was the first cannabis company to have an initial public offering and to trade on the NASDAQ, with its July 2018 IPO.
The lead plaintiff filed the present suit on behalf of himself and all other individuals who purchased Tilray common stock on the NASDAQ from January 16, 2019 through March 2, 2020 alleging violations of the Securities Exchange Act.
Specifically, the second amended complaint alleges that Tilray’s CEO Brendan Kennedy misled investors about Tilray’s revenue and financial security resulting in a 95% decrease in share value for investors who purchased Tilray stock during the January 16, 2019 through March 2, 2020 period. The plaintiffs argue that, despite the drop in share price, Kennedy’s misleading statements were part of a long con to effectuate two separate mergers to make Tilray the largest cannabis company in the world.
The plaintiffs argue that Kennedy told reporters and investors that the cannabis market was in its infancy and would reach sales of $200 billion per year. Further, the complaint states that Kennedy informed investors that, like the beer market, the cannabis market would be dominated by three or four giant companies and that Kennedy would make it so Tilray was one of those giants.
The motion to dismiss states that the second amended complaint is the plaintiffs’ “third failed attempt to cobble together a coherent case.” The motion purports that on September 27, 2021, the court dismissed the plaintiffs’ first amended complaint stating that it “failed to adequately plead scienter” and that the allegations were “vague, speculative, and conclusory.”
Further, the motion to dismiss states that the original complaint alleged a theory that Kennedy made the challenged statements to inflate Tilray’s stock price to effectuate just a single downstream merger. The defendants argue that the court must dismiss the second amended complaint because the court found that the first amended complaint did not adequately allege facts to support a single downstream merger, and the plaintiffs have failed to provide additional facts to support the “even more preposterous theory” that Kennedy planned to effectuate two separate mergers.