Shares of cannabis company Sundial (SNDL) - Get Report were falling Monday on a report the company was the subject of a class action lawsuit for failing to disclose that a customer returned 554 kilograms of cannabis because it contained mold and bits of rubber gloves.
MarketWatch first reported that fellow Canadian cannabis company Zenabis (ZBISF) returned the cannabis and terminated its sales agreement with Sundial on Aug. 20. Zenabis disclosed that it had returned a half a ton of marijuana on that day, the same day that Sundial reported its quarterly earnings.
The batch was worth about $C2.5 million ($1.9 million), according to MarketWatch, which is named in the lawsuit against the company.
The suit alleged that Sundial "made false and misleading statements and/or failed to disclose that: (1) Sundial failed to supply saleable cannabis in line with contractual obligations to Zenabis Global Inc.; (2) due to material quality issues, Zenabis had to return or reject a total of 554 kg of cannabis to Sundial, valued at approximately U.S. $1.9 million (C$2.5 million); and (3) as a result, defendants statements about Sundials business, operations, and prospects were materially false and misleading and/or lacked a reasonable basis at all relevant times."
Sundial shares were down 4.7% to $4.45 Monday afternoon.