A group of underwriters has officially pulled the plug on a planned stock sale by Maricann Group Inc. after the cannabis grower failed to inform investors that the Ontario Securities Commission is investigating trading by three directors.
In late January, the company was seeking to raise $70-million by selling units for $4 each. The units were comprised of one common share and one common share purchase warrant. Since that time, Maricann's shares have fallen by nearly 50 per cent amid a broad selloff in pot stocks.
The deal, which was slated to close on Feb. 23, had been brought to market by five firms. It was co-led by Eight Capital and Canaccord Genuity Corp., which both had agreed to buy 40 per cent of the financing from Maricann and then resell those securities to other investors.
In a news release late on Thursday, Maricann said the underwriters had formally cancelled the deal but didn't provide a reason for doing so. The company, which grows cannabis at a facility about two hours southwest of Toronto in Langton, Ont., said it was going to use the funds to pay for acquisitions.
Maricann's chair and another director resigned on Wednesday after it became public that the OSC had raised questions in February about their trading in the company's shares days before the stock financing was announced. A third director is also facing a probe into his trading activity, Maricann said.
The company also said that its chief executive, Ben Ward, is being investigated by the OSC for his actions at another firm called Canadian Cannabis Corp., a company he ran from 2013 to 2016.
The investment banks can terminate the offering without penalty if it comes to light that a securities commission is looking into the company or its officers or directors over any alleged wrongdoing that could harm the business, according to a copy of the underwriting agreement signed by Maricann.
On Wednesday, the first trading day after the inquiries became public, shares of Maricann plunged by 22 per cent to $1.97. The stock, which is listed on the Canadian Securities Exchange, rose 5 per cent on Thursday.
"We are disappointed to have received the notice of termination and are considering our options for further action," interim chair Paul Pathak said in a statement.
Maricann added that it is still trying to complete another warrant sale announced in early January. It sought to raise $40-million from that deal.