Green Organic Dutchman sued over warrant terms
Stockwatch Daily
22 Jul 2019
By Mike Caswell
THE GREEN Organic Dutchman Holdings Ltd. is facing a lawsuit in the Supreme Court of British Columbia from a group of early shareholders who complain that the company reneged on a warrant agreement. They say that they held warrants that were well in the money that they wanted to exercise. When they attempted to do so, The Green Organic Dutchman blocked the transaction, they claim.
The allegations are contained in a notice of claim filed at the Vancouver courthouse on July 15, 2019. The plaintiffs, a group of subscribers in a 2017 private placement, are Iostesso Holdings Inc., 2 Chisholm Court Property Inc., PT Enterprises Inc. and Jonathan Wener. The sole defendant is The Green Organic Dutchman, a medical marijuana listing with an office in Mississauga, Ont.
The case stems from a March 22, 2017, private placement that occurred well before The Green Organic Dutchman had obtained a listing. Subscribers to the placement purchased units at $1.15 and received warrants that were exercisable at $2.15. According to the suit, the warrants were to be exercisable on April 4, 2017, and the resulting shares would be tradable on April 4, 2018.
As it turned out, the company did not obtain a listing until May 8, 2018, when it began trading on the Toronto Stock Exchange. The stock quickly topped its initial public offering price of $3.65, going above $7 within weeks. According to the suit, the shareholders moved to take advantage of the gains, confirming with the company that they could exercise their warrants and immediately sell their shares. The company’s lawyer confirmed that they could indeed do so, the suit states.
The problem, as set out in the suit, occurred when the shareholders attempted to execute the necessary transactions. They claim that The Green Organic Dutchman instructed its transfer agent not to allow the sale to proceed. Despite what it had said earlier, the company took the position that the warrants could not be exercised until six months after it had begun trading.
The shareholders complain that after that, they were unable to exercise the warrants and sell the shares until November, 2018. By then, the stock had declined. The sales fetched prices between $3.40 and $4.58, in some instances less than half what they would have six months earlier, the suit states.
Accordingly, the shareholders are asking for damages stemming from the loss in value of their shares. They are also asking for a declaration that their warrant shares should have been freely tradable on April 4, 2018. Vancouver lawyer Andrea Gray of McCarthy Tetrault LLP filed the lawsuit on behalf of the shareholders.
The Green Organic Dutchman has not yet filed a response to the claim.
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