A proposed class action lawsuit filed by a Greenlane Holdings common stockholder alleges the e-cigarette and vaporizer company failed to disclose to investors prior to its IPO that San Francisco introduced a measure to ban the sale of e-cigarette products across three cities and prohibit the manufacture of such on property subleased by key partner Juul Labs.
Filed in Florida federal court, the complaint explains Boca Raton-based Greenlane Holdings is one of the largest distributors of Juul Labs-made products, as well as other e-cigarettes, vaporizers, hemp-derived CBD and accessories. The company on April 22, 2019 filed a prospectus on Form 424B4 with the Securities and Exchange Commission (SEC) as part of the registration for its initial public offering (IPO), the case states. In the IPO, according to the suit, Greenlane sold roughly 6.45 million shares of stock at $17 per share, netting proceeds of approximately $110 million purportedly pegged for “capital improvements to its warehouses and other facilities,” as well as information technology systems and general corporate purposes.
On June 18, 2019, the lawsuit says, the San Francisco Board of Supervisors unanimously approved the ban on the sale and distribution of e-cigarette products within city limits, and similarly endorsed a ban on the manufacturing of e-cigarette products on city property. News of this coincided with a more than 17-percent dip in Greenlane stock prices, the case states, a decline that continued over the next three trading sessions. All told, Greenlane’s stock ended up trading nearly 68 percent below its per-share IPO price, according to the complaint.
The plaintiff argues that the registration statement Greenlane submitted to the SEC was false and misleading in that it failed to disclose to investors that San Francisco planned to ban the sale and manufacture of e-cigarette products within the city, in particular at the headquarters of Juul Labs. Further still, the lawsuit claims Greenlane failed to note to investors that San Francisco’s dual ban would “materially and adversely impact” its financial results and prospects. San Francisco’s initiative to ban the sale of e-cigarettes and vaping products in the city was introduced in March 2019, a month before Greenlane’s IPO, the case adds.