Tilray to pay C$30M to settle shareholder lawsuit over 2018 acquisitions

Tilray Brands (NASDAQ: TLRY) agreed to pay C$30 million to settle a class action lawsuit alleging the company misled investors about a pair of 2018 acquisitions, according to a settlement notice posted Monday.

The proposed settlement, which requires court approval, would resolve claims that Tilray and certain former executives made false statements about Nuuvera Inc. and LATAM’s business assets in Latin America and failed to disclose that company insiders improperly benefited from the purchases.

The lawsuit covers investors who purchased Tilray shares between July 17, 2018, and Dec. 3, 2018.

Tilray and the individual defendants deny all allegations of wrongdoing.

“The Settlement is a compromise of disputed claims and is not an admission of liability or wrongdoing by Aphria or the Individual Defendants,” the short-form notice said.

The case originated from a December 2018 report by now-shuttering Hindenburg Research alongside Quintessential Capital Management, a research partner at the time, that alleged Tilray failed to disclose material facts about the deals. The researchers claimed the assets were purchased by a Canadian shell company under the control of Aphria insiders and were “essentially worthless.”

Following the report’s publication, Tilray’s stock price dropped from $10.51 on Nov. 30, 2018, to $5 on Dec. 5, 2018, according to the claims. The company subsequently appointed a special committee of independent directors consisting of John M. Herhalt, Shlomo Bibas and Tom Looney to review the acquisition.

The settlement hearing is scheduled for March 26 at 11:30 a.m. in Toronto, according to the notice. If approved, class counsel fees will not exceed 30% of the settlement amount plus reimbursement for expenses incurred in the litigation.

Class members have until March 14 to file objections or support for the proposed settlement. The settlement amount will be primarily funded through an Aphria insurance policy and by the individual defendants, according to the longform notice, with Tilray funding the remaining unpaid portion estimated at approximately C$8.5 million.

Tilray acquired Aphria in 2021. The lawsuit was originally filed against Aphria before the merger.