Cannabis operator Canopy Growth hit with class action lawsuit
Investors in cannabis operator Canopy Growth Corp. have sued the company to recover alleged damages after a poor quarterly earnings report.
The class action lawsuit – filed in April by shareholders who purchased Canopy stocks between May 30, 2024, and Feb. 6, 2025 – followed a sharp decline in the value of the company’s shares revealed in a Feb. 7 earnings report.
At the heart of the investor dispute are allegations that Canopy downplayed the costs of launching a new pre-roll line and of acquiring a major vaporizer company.
According to court records, the complaint alleges that Canopy made false and misleading statements about its business, operations and prospects by failing to disclose:
- Significant costs producing a line of pre-rolled joints under the Claybourne brand that launched in Canada in November.
- Costs incurred in connection with the 2018 acquisition of major vaporizer company Storz & Bickel were likely to have a negative impact on the company’s gross margins and overall financial results.
The current lead plaintiff in the proposed class action suit is Bruce Baron.
The suit names former company CEO David Klein, who retired in March, and Chief Financial Officer Judy Hong as defendants.
The company has until June to respond to the suit in full, according to court documents.
On Feb. 7, before the market opened, Canopy issued a news release announcing its financial results for the third quarter.
The company reported that its “(g)ross margin decreased by 400 basis points to 32%” in the third quarter of 2025 compared to the same period a year ago because of costs related to the Claybourne launch in Canada and an increase in the costs of the Storz & Bickel vaporizers.
During a conference call later that day, Hong said the company’s Claybourne product launch costs were “primarily attributable to (the) higher initial cost to product Claybourne” products.
Hong also attributed the “indirect costs” related to Storz & Bickel devices to shipping.
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As a result, Canopy’s common share price fell 76 cents per share, or 27.34%, to close at $2.02 on Feb. 7.
Canopy shares trade on the Nasdaq as CGC and on the Toronto Stock Exchange as WEED.
Shares were trading around $1.32 around midday Friday.