On November 16, 2020, the Superior Court of Québec authorized the filing of a Re-Amended Motion for Authorization to Bring an Action Pursuant to Section 225.4 of the Québec Securities Act and Application for Authorization to Institute a Class Action against the defendants HEXO Corp. (“HEXO”), a Canadian cannabis producer, and its CEO, Sébastien St-Louis (“St-Louis”).
The purpose of this proceeding is to obtain the permission of the Court to institute a class action on behalf of HEXO investors who suffered monetary losses because of misrepresentations made by the defendants, including their failure to make timely disclosures of material facts. Due to these misrepresentations, the price of HEXO’s securities was artificially inflated at the time of their acquisition by potential class members, and it plummeted when the truth came to light.
The defendants’ misrepresentations relate to two main interrelated themes. First, an agreement entered into between HEXO and the Société québécoise du cannabis (ʺSQDCʺ), which the defendants represented as including a provision forcing the SQDC to purchase 20,000 kg of cannabis from HEXO in the first year after legalization in Canada. The defendants reiterated on numerous occasions that the revenues associated with this alleged ʺtake or payʺ feature of the SQDC agreement were ʺguaranteedʺ, when, in fact, the defendants, in a complete reversal, later claimed they were not.
Second, the defendants misrepresented the revenues to be derived from the acquisition of cannabis producer Newstrike Brands Ltd., whereas they knew or should have known that the financial benefits they were touting were misleading.
The proposed action is to be instituted on behalf of the following “Class”:
- Primary Market Sub-Class: All persons and entities who acquired HEXO securities in an offering on or after April 11, 2018, and held some or all of those securities until after the close of trading on: (1) June 12, 2019; (2) October 9, 2019; (3) October 28, 2019; (4) November 15, 2019, (5) December 13, 2019, (6) December 30, 2019, (7) March 16, 2020; or (8) March 27, 2020; excluding investors who acquired HEXO securities in an offering in the United States between January 23, 2019 and March 30, 2020; and
- Secondary Market Sub-Class: All persons and entities who acquired HEXO securities on the secondary market on or after April 11, 2018, and held some or all of those securities until after the close of trading on: (1) June 12, 2019; (2) October 9, 2019; (3) October 28, 2019; (4) November 15, 2019, (5) December 13, 2019, (6) December 30, 2019, (7) March 16, 2020; or (8) March 27, 2020; excluding investors who acquired HEXO securities on a U.S. exchange between January 23, 2019 and March 30, 2020;
The following persons are excluded from the Class: (a) HEXO and its subsidiaries, affiliates, officers, directors, senior employees, legal representatives, heirs, predecessors, successors and assigns, (b) St-Louis, and any member of his immediate family, (c) any senior level employee of any insurance company providing directors’ and officers’ insurance to defend this proceeding, and (d) any licensee employed by the defendants’ law firms defending this proceeding.
If the Court grants leave to proceed with this class action, and you fit the above definition of Class, you will automatically be a class member. You do not need to sign up. You will eventually be entitled to file a proof of claim if the case settles or is resolved by a favorable judgment (in accordance with the instructions that would then be given by the Court).
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