Cronos Group – $500 Million Class Action Lawsuits
Cronos Group is a Canadian cannabis product manufacturer. Their headquarters is in Toronto, Canada and their CEO is Kurt Schmidt since September 2020. The company focuses on researching and developing cannabis products.
Lately, this firm has been in the limelight for deceiving its investors.
The following column is not a Cronos Group Wikipedia entry, but it’s definitely worth the read if you’re looking for any Cronos Group news.
Truth About The Cronos Group Stock
The Cronos Group stock might seem like an attractive option at the moment but many issues are surrounding it, making it difficult to assume that the Cronos Group stock will grow as expected.
Recently, a single report caused the Cronos Group stock to sink because of the numerous revelations it made. The report shared that the company was deceiving the investors by deliberately hiding the size of their distribution agreements with provinces. Keep in mind no other cannabis company of such stature hides this information from its public investors.
The reason why the company hid the size of their distribution agreements is that they are too small. And they can’t justify the premium investors are paying for their stocks with such small agreements.
In other words, the only reason why the Cronos Group stock has any value is because of manipulation and deception. The company has used paid PR and promotion to misguide investors to inflate the value of the Cronos Group stock.
Other companies such as Tilray and Canopy Growth have shared all the information related to the size of their distribution agreements. Cronos Group is the only major cannabis firm that’s hiding such vital information from its investors.
Certainly, it puts the intent of the company in question and makes one wonder, “Is Cronos Group stock a buy or a waste?”
Cronos Group Directors Mislead Long-Term Stockholders For Personal Gains
If you’re hoping for a positive Cronos Group stock forecast, you’ll be disappointed to read this section. The Cronos Group is facing a class action lawsuit for misleading its long-term investors.
On March 11, 2020 investors of the firm filed a lawsuit for making materially false statements about the firm’s operational, business, and compliance policies. Their primary complaint was that the company withheld that it engaged in substantial transactions which made its revenue recognition inappropriate.
It also delayed their ability to file their reports timely making their public statements false and misleading in the class period.
The cannabis firm had announced in March 2020 that it requested an extension from the SEC to file their Form 10-K for 2019. They also said that they can’t give an assurance that they can meet the new deadline.
The Cronos Group also shared that the delay happened because of an Audit Committee investigation into their bulk purchases and wholesale product sales.
This is related to the report I mentioned before. The report highlighted how the firm is all talk and it caused the Cronos Group stock to drop more than 28%.That report had prompted another class action lawsuit where the investors allege that the company failed to disclose the size of its distribution agreements. As a result, the company was misleading its stockholders.
It has been one of the biggest Cronos Group news. And nearly every major publication has covered these lawsuits. However, if you look up Cronos Group news, there’s a good chance that you won’t find these articles. Why? Because this firm has spent heavily on its promotions to bury any negative Cronos Group news:
Lying About Revenue To Defraud Investors
The class action lawsuit I shared above is a lot more problematic than it seems. It is one of the biggest problems this Canadian firm is facing at the moment. According to the lawsuit, Cronos was posting increased revenue in the first 3 quarters of 2019 which showed that the company had a bright future in the Canandian marijuana market.
There’s more. The cannabis firm inflated its reported revenue numbers by performing multiple transactions where they sold cannabis dry flower and bought back cannabis tincture and resin. These transactions were in contemplation of each other but Cronos recorded them as revenue instead of carrying value of inventory they transferred.
What is the danger of customer fraud?
The risk of fraudulent activity is the potential for any unforeseen loss, whether it be material, financial, or reputational, as a result of fraud by an inside or outside actor. Financial losses resulting from theft, embezzlement, or other sorts of financial crime are examples of how fraud has an impact.
By using this tactic, Cronos Group inflated their balance sheet and misled investors into thinking that the firm was growing. The lawsuit says that around 35% of their reported revenue consists of these false transactions.
Cronos’ investors have also named the upper management of the firm as the defendants of their lawsuit. Those people knew that they can’t share the false information yet they did through press releases and other communications.
$500 Million Lawsuit Against Cronos Group For Incorrect THC & CBD Levels
In 2020, a class action lawsuit was filed against multiple cannabis companies for lying about the THC and CBD levels in their products. It alleges that the actual THC and CBD levels in their products are different from what’s shown on the packaging.
The lawsuit is against multiple big players of the cannabis industry. And one of them is Cronos Group.
The lawsuit found that the THC and CBD levels were either substantially higher or lower in the products. It could have been because of degradation or absorption through the use of plastic bottles.
The plaintiff tested the products with her doctor friend who found that the THC levels in the product were only 46% of what was listed on the label.
SEC Action Against Them
The SEC is performing an inquiry into the Cronos Group and its suspicious practices. Cronos tried their best to hide this information from the public eye. Because they didn’t want anyone to learn about the SEC investigation.
After all, it wouldn’t look good for any Cronos Group stock forecast. And it certainly would damage the brand image.
There are many flaws in the financial reporting of the Canadian firm. And the SEC investigation suggests there’s a lot to uncover.
Avoid Cronos Group
There are many flaws in this Canadian company. It seems the company deliberately hid certain information so it can enhance the Cronos Group stock value. This is a highly unethical practice.
Couple that with an SEC investigation and multiple class action lawsuits, and you have a recipe for disaster. The future looks pretty bleak for their investors.
