Neptune Wellness insider trading case settled

The Securities and Exchange Commission (SEC) accepted a settlement with John M. Moretz regarding insider trading of Canadian cannabis company Neptune Wellness Solutions Inc. (OTC: NEPTF). Moretz didn’t admit to the SEC’s allegations of insider trading but agreed to pay a $115,000 penalty and be barred from serving as an officer of a public company for three years.

According to the SEC order published on May 3, Moretz was Neptune’s Chairman of the Board of Directors, and he told a close friend about  Neptune and a possible acquisition of SugarLeaf Labs, Inc., a hemp processor located near Hickory, North Carolina, where Moretz and his friend both resided. Moretz had told Neptune’s CEO that he believed that buying SugarLeaf was a good idea that could help Neptune grow from a $20 million company to a $100 to $200 million company. The board voted on the plan on March 5, 2019, and agreed to pursue the acquisition. The deal was closed on July 24, 2019.

The day the board decided to buy SugarLeaf, the friend’s spouse opened a brokerage account and began purchasing Neptune stock in anticipation of the May 9, 2019 announcement. The unnamed spouse told the broker that her husband, also unnamed, was friends with Moretz and that he told them the stock would go to $12. It was trading at roughly $3.50 at the time. Despite the broker advising against the purchases, the spouse ended up buying $500,000 worth of Neptune stock. Both the spouse and the sister lost money as the stock fell below the purchase price. The stock now trades at 30 cents a share. Moretz resigned from the board in February 2022.

SugarLeaf problems

Separate from insider trading, the SugarLeaf acquisition caused huge problems for Neptune. The company was accused of not telling shareholders the actual cost of the acquisition, which was larger than investors were told. The company was forced to keep issuing more shares to cover the higher expense of the deal causing stock dilution and the share value to tumble. That sparked a shareholder class action lawsuit against Neptune.

In addition to that issue, the owner of SugarLeaf Peter Galloway sued Neptune over the purchase of the company. Galloway says he was terminated from SugarLeaf and didn’t receive his severance pay. He won an arbitration amount totaling $4 million, which Neptune continues to fight.

CEO leaves

Michael Cammarata, who served as President and Chief Executive Officer since 2019 was placed on a mandatory unpaid leave of absence on February 23, 2024, due to the company’s financial problems. He is challenging the move. More recently in March, Neptune Wellness named Board member Michael De Geus Interim President and Chief Executive Officer.

Neptune exited the cannabis industry in 2023 and is now focused on organic children’s food.