Debra BorchardtThe battle over Parallel Cannabis’ future rages on.
Last week, beleaguered equity shareholders filed another response in court after the Wrigley Group and the Talladega Group requested the case be dismissed. More than 20 plaintiffs allege that the Talladega group worked in cahoots with former CEO William “Beau” Wrigley to take control of the company in a “loan-to-own” scheme, which is the basis of their claim.
Backstory
Chewing-gum heir Wrigley was Parallel’s CEO, chairman, largest stockholder, largest creditor, and chief fundraiser. The company was on track to be a part of a Special Acquisition Corp. (SPAC) deal with Ceres Acquisition Corp., which had valued the company at more than a billion dollars. But the deal fell through after due diligence led investors to believe that Parallel might not be able to deliver on its lofty projections.
The SPAC was terminated in October 2021.
Then in March 2022, disgruntled investors sued Wrigley and Parallel, claiming that that Wrigley loaded up the company with excessive debt and misrepresented its financial health. The complaint alleged that Wrigley’s goal was to get the company taken public through the Ceres Acquisition Corp. SPAC and then exit with a profit.
The lawsuit pulled back the curtain on incestuous relationships between Wrigley and his home office and loans to Parallel. Tellingly, the junior lender Talladega LP and Talladega Inc. asked in May 2022 to be removed from the investor lawsuit.
By July 2023, a judge agreed there was enough evidence for the investor case to move forward. However, mismanagement at the company caused a meltdown of operations. Unpaid rents and angry creditors called for a foreclosure of the assets. That’s when a restructuring plan was hatched.
Talladega Deals
The shareholders claim that the Talladega group, a junior lien holder, agreed to release Wrigley, who owned most of the senior debt, from consequences when they took part in a super-senior bridge credit agreement with the Wrigley Control Group. This allowed the Talladega group to essentially jump to the front of the creditor line.
The shareholders also claim that there were other debt options presented that would have reduced the dependence and control of Wrigley, but the newly appointed board declined to entertain those options. According to court filings, the shareholder group claimed that the new directors were paid very generously, which made them biased in favor of the Wrigley group, which meant that the board lacked independence.
The Wrigley Group and the Talladega Group presented the restructuring plan to the judge as an option since bankruptcy court isn’t available to cannabis companies. However, if that plan were followed, the equity shareholders would lose all of their investments.
