US consumers who seek out complementary and alternative health products and services spend an estimated $30 billion every year for them.
One of the most popular new supplements is CBD oil, or cannabis oil, made popular by the legalization of marijuana in many US states. Although marijuana is still illegal on a federal level, CBD oil is grown and produced in the states where it is legal, and sold nationwide where allowed.
Many companies have become purveyors of various CBD products in the last few years. Investors have also become interested in CBD and other cannabis- and hemp-related products and the companies that produce them.
One such company is Neptune Wellness Solutions, (NEPT) headquartered in Laval, Quebec. The company has a 50,000 square-foot production facility in Sherbrooke (also in Quebec) with another processing facility in North Carolina. The company sells nutraceuticals and legal cannabis products under five brand names. This includes “white label” consumer products, which are company branded but manufactured by a third party.
Acquisition Of SugarLeaf
Neptune announced in May of 2019 that it had plans to acquire another cannabis company, SugarLeaf. Based in North Carolina, SugarLeaf is a registered NC commercial hemp company that provided extraction services and formulated products. The company announced the closing of the SugarLeaf sale in July of 2019, and told investors about the benefits of the sale on Neptune’s financial wellbeing.
However, Neptune’s statements misrepresented the actual cost of integrating SugarLeaf’s assets and operations, which was larger than announced. These costs took more of Neptune’s capital reserves than indicated. Neptune was then required to have additional stock offerings to raise more capital.
February 15, 2021 Press Release
Neptune issued a press release announcing the unsatisfactory financial results for the fiscal year 2021 third quarter, which was less than analyst expectations. The next day, February 16, 2021, Neptune’s stock price fell $0.86 per share, (over 30%) closing at $1.94 per share on February 16, 2021.
The Company then disclosed that its “[g]ross margin declined to a loss of 268.3%.” This included a non-cash CA$7.39 million “write-down of inventory and deposits to reflect their net realizable value.”
The next day (February 17), before the open of trading, Neptune issued a company press release that announced the end of their at-the-market offering to sell over 9 million shares of its common stock to raise $18.6 million in gross proceeds. A.G.P./Alliance Global Partners was sole placement agent for the offering.
Within minutes, the company issued another press release to announce Neptune’s new $55 million registered direct offering. After this press release, Neptune’s stock fell $0.21 or 10.82%, closing at $1.73 per share on February 17, 2021. Neptune’s stock has not yet recovered from this drop.
Are You An Investor In Neptune Wellness?
If you’re an investor in Neptune Wellness, you’re encouraged to contact The Silver Law Group for additional information and to help us in our investigation.
Silver Law Group is a nationally-recognized class action law firm representing victims of investment fraud. Our attorneys represent investors in class action lawsuits against issuers in state or federal court and investors in securities arbitration claims against Wall Street firms for stockbroker misconduct.
Scott Silver, Silver Law Group’s managing partner, is the chairman of the Securities and Financial Fraud Group of the American Association of Justice. Contact us for a consultation at ssilver@silverlaw.com or toll free at (800) 975-4345.