Vermont publication 7 Days writes
A Burlington cannabis entrepreneur is suing the Canadian company he merged his company with as part of a $25 million deal in 2021.
Shayne Lynn of High Fidelity claims that executives at Toronto-based SLANG Worldwide “used unlawful sharp practices to hoodwink” him about the state of SLANG’s financial condition before taking over his company.
Filed in Vermont Superior Court last month, the suit accuses SLANG, its cofounder and former board chair Peter Miller, and its former CEO Christopher Driessen of fraud and negligent misrepresentation related to the deal.
Lynn once held two of Vermont’s five medical marijuana licenses and operated stores under the name Champlain Valley Dispensary and Southern Vermont Wellness. He later changed the name to CeresMED, which operated under a parent company, High Fidelity.
SLANG started pursuing Lynn’s company shortly before Vermont’s legislature legalized cannabis for recreational use, the suit says. Under the new law, Lynn, as a medical cannabis retailer, was entitled to what is known as an integrated license, which would allow him to open a store several months before the general public. The head start would give Lynn’s company “a significant economic advantage over potential competitors” and “establish a distinctive brand and market share before competitors commenced operations,” the suit says.
SLANG, a publicly traded company, buys and sells licenses for cannabis edibles and accessories. Executives told Lynn the company “was financially sound and had a bright economic future,” the suit says, and they promised Lynn $18 million to finance his plans for growth.
Much of the merger deal involved stock options, meaning SLANG’s success was critical for Lynn’s High Fidelity shareholders to make any money. Yet even as the sides negotiated, SLANG executives were aware the company “was losing money and would not survive without an influx of cash to support continued operations,” the suit says. The acquisition of “valuable assets” such as Lynn’s company, according to the suit, would be attractive to lenders.
Lynn, meanwhile, was offered only “materially misleading” public documents about the financial health of the company and was unaware it was “teetering on the edge of insolvency.”