Maricann faces OSC scrutiny over bought deal
Maricann Group Inc., one of Canada's emerging marijuana companies, is facing scrutiny from the country's largest securities regulator over its disclosure related to a late-January equity financing.
Maricann's stock was halted from trading by the Investment Industry Regulatory Organization of Canada (IIROC) around lunch time on Tuesday, pending company news.
Maricann announced a $70-million equity financing in late January, with Eight Capital and Canaccord Genuity Group Inc. serving as co-lead underwriters. Maricann was looking to sell a combination of common shares and common share purchase warrants.
In early February, the Ontario Securities Commission sent the company detailed questions related to disclosure and the trading activity of the company's chairman and one other director in the days before it filed a prospectus for the financing.
In a letter, dated Feb. 8 and obtained by The Globe and Mail, to Cassels Brock & Blackwell LLP, the lead legal adviser for the financing, the OSC asks Maricann whether it was going to disclose an investigation into chief executive officer Ben Ward.
"We understand that Ben Ward is the subject of an investigation, by the staff of the OSC Enforcement Branch, into his activities while he was the CEO of Canadian Cannabis Corp.," the letter stated. Mr. Ward was CEO of Canadian Cannabis from 2013 to 2016. The company is a very small U.S.-traded firm that operates in the medical marijuana space.
"Please explain whether the Issuer would be prepared, subject to any applicable confidentiality restrictions in the Securities Act (Ontario), to disclose in the final prospectus that Mr. Ward is the subject of an OSC investigation into his activities while he was CEO of Canadian Cannabis Corp."
It is unclear specifically why the OSC has been investigating Mr. Ward.
A day later, on Feb. 9, the OSC sent another letter to Cassels Brock, inquiring about other matters, including recent trading in Maricann shares by the company's chairman, Julian Neil Tabatznik, and another director, Raymond Stone.
The alleged trading occurred through entities either indirectly held or controlled by Mr. Stone and Mr. Tabatznik. Combined, the two men sold about 4 million shares in the week leading up the equity financing, according to the OSC letter, citing insider trading disclosures.
The OSC asked Maricann to explain if the sales contravened the company's corporate disclosure and insider trading policy or Ontario securities law.
The fate of the bought deal is unclear. According to one source familiar with the transaction, the financing was pulled from the market early Tuesday. It is unclear whether the transaction has been cancelled altogether, or will come back in a different form.
Maricann declined to comment on Tuesday afternoon, but said the company will be releasing a statement. Cassels Brock and Eight Capital and did not immediately respond to requests for comment.
Maricann was founded in 2013 and obtained a Health Canada licence to cultivate plants in March, 2014. The company started trading on the Canadian Securities Exchange (CSE) in April, 2017.
Maricann's stock hit a peak of $4.25 in late January, around the time of the alleged share sales by the directors. It is currently trading at $2.49 and fell 7 per cent in early morning trading on Tuesday before being halted
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