Shares of medical marijuana producer Maricann plunged more than 24 per cent on Wednesday after it revealed that a $70 million financing deal had been cancelled as it faces an investigation from the country’s biggest securities regulator.
Underwriters for a group of investment banks “orally” told the company that they will no longer go ahead with a share sale or bought deal that would have raised $70 million for Maricann, it said in a statement.
The firm also said that several executives are being investigated by the Ontario Securities Commission (OSC) for the “timing and reporting of certain trades” of shares owned or controlled by directors Neil Tabatznik, Raymond Stone and Eric Silver.
“Stone, Tabatznik and Silver have advised the company that they are fully cooperating with the OSC in its review,” the firm said.
Both Tabatznik and Stone have resigned from the small cannabis producer in light of the probe.
The Toronto-based company has appointed director Paul Pathak as interim chairman of its board.
Maricann also revealed that the OSC began investigating CEO Ben Ward on Feb. 8 for his “activities” while he was the head of another marijuana firm — Canadian Cannabis Corp.
“Prior to this, the company was unaware of the matter,” it said in a news release.
“The company is unaware of any facts that could reasonably lead it to conclude that this investigation has had, or will have, any impact on the ability of Mr. Ward to properly and effectively carry out his duties as CEO or director of the company.”
The firm added that Ward was fully cooperating with the investigation. He was the head of Canadian Cannabis from 2013 to 2016.
Maricann said it has created a special committee, including an independent law firm, to review the trades and OSC investigation in an attempt to address concerns.
“We have heard from many significant shareholders of the company about their concerns with these matters, and we share them,” said Pathak.
“The special committee’s review is ongoing, but we are committed to providing the stakeholders of the company with a further update on its review shortly,” he added.
The company’s shares were halted from trading on Tuesday in Toronto, but resumed trading today when it plummeted in the morning.
News of the investigations come at a time when scrutiny on Canada’s marijuana sector has increased in light of the young industry’s booming growth.
Maricann, similar to other new marijuana producers, have been seeing growing interest from investors to expand operations ahead of the Canadian government’s move to legalize the recreational use of the drug this summer.
Expansion deals have lead to stock valuations for producers to skyrocket in the past year, but share prices have taken a hit lately as companies face uncertainty over whether they can meet the demand.
Founded in 2013, Maricann has production facilities in Langton, Ontario and in Germany.