(This story has been updated to include information provided by Health Canada confirming it is investigating the situation surrounding Namaste’s recent shareholder pledge party.)
A reportedly racy shareholder party hosted by Namaste Technologies has cost the Toronto company its business ties with fast-growing cannabis producer Tilray.
Officials with Tilray confirmed in an email to Marijuana Business Daily that it had “ended its relationship” with Namaste after a highly publicized “pledge party” the firm held for stockholders who promised not to sell company shares for 90 days.
Earlier in the month, the two firms signed a purchase agreement under which Namaste would buy bulk cannabis from Tilray to sell on its subsidiary CannMart’s e-commerce platform.
According to a report by Canada’s La Presse, women dressed in “sexy” nurse uniforms enrolled patients in the company’s telemedicine portal with a pledge for consultation and cannabis recommendation via email.
Health Canada is “aware of the event that took place in Montreal and is in the process of following up with the parent company and the licensed producer,” André Gagnon, a spokesman for Health Canada, wrote in an email to MJBizDaily.
“Until the new prohibitions on promotion come into force on October 17, 2018, the advertising of cannabis remains subject to several prohibitions in both the Narcotic Control Regulations (NCR) – made under the Controlled Drugs and Substances Act – and the Food and Drugs Act,” Gagnon wrote.
“If a person or a corporation is suspected to be in contravention of federal advertising prohibitions, Health Canada would investigate and take appropriate compliance and enforcement action, if necessary.”
Tilray spokeswoman Chrissy Roebuck said the firm was “not aware of and did not approve Namaste’s recent promotional activities. We do not believe these types of activities will further legitimize medical cannabis with the medical community.”
A Namaste release called the La Presse story “misleading.”
“Furthermore, it is with disappointment that Tilray chose to terminate the agreement, as Namaste was not in breach of any terms of the agreement,” Namaste’s CEO Sean Dollinger said in the announcement.
The fallout with Tilray underscores the growing scrutiny placed on cannabis companies, said Mitch Baruchowitz, managing partner with Merida Capital Partners.
“There are a lot of places for investors to put their money, and operators have to understand they are under intense scrutiny,” Baruchowitz said. “It’s cool to be the guy that does things differently, but you don’t want to be the guy that does it at the cost of losing (massive) market cap.
“People still want to be graded on a curve because this is a hot industry, but I think that the period of investors ignoring critical shortcomings is coming to an end.”
Namaste sells vaporizers and smoking accessories through more than 30 websites in 20-plus countries, including Canada, Britain, Australia and Brazil. The company – which has been called the “Amazon of cannabis” by some – trades on the over-the-counter markets under the ticker symbol NXTTF.
The company hopes to uplist to the Nasdaq.
Tilray trades on the Nasdaq as TLRY.
Lisa Bernard-Kuhn can be reached at [email protected]