A Canadian cannabis company is being investigated by a securities regulator after two of its directors sold millions of dollars worth of shares only days before it announced a large equity financing.
The licensed producer, Maricann Group, also failed to disclose to investors that its CEO is under investigation for actions at a previous company, The Globe and Mail reported.
The Ontario Securities Commission confirmed to Marijuana Business Daily that there is an active investigation but didn’t comment further.
Maricann directors Raymond Stone and Neil Tabatznik have resigned and are cooperating with the commission in its review, the company said in a news release the day after the newspaper’s report.
The cannabis sector has faced greater scrutiny in recent weeks as investors start to question whether some companies can live up to their lofty valuations.
The Canadian Marijuana Index – representing 24 leading cannabis stocks – had soared 380% since Sept. 1, until a recent correction clipped 40% off the index’s valuation.
On Jan. 29, Maricann announced a stock-purchase deal to raise 70 million Canadian dollars ($54 million) in capital, with underwriters Eight Capital and Canaccord Genuity.
Tabatznik and Stone sold CA$3.57 million and CA$4.84 million worth of Maricann stock, respectively, in the days ahead of the capital raise, according to insider trading records.
On Feb. 8, the securities commission asked the equity deal’s legal adviser whether Maricann would disclose to investors that CEO Ben Ward has been under investigation for actions related to his role at a company he once led, according to The Globe and Mail.
In a news release issued after the report, Maricann confirmed that Ward is the subject of an investigation into his actions while he was CEO of Canadian Cannabis Corp., a company unrelated to the Maricann.
Trading of Maricann’s stock (MARI) on the Canadian Securities Exchange was halted Tuesday before it resumed Wednesday morning.