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The suit accused Aurora of engaging in a $21.7 million “round-trip sale” to artificially juice its numbers.
A federal judge granted preliminary approval to an $8.05 million settlement between Aurora Cannabis Inc. (NASDAQ: ACB) and investors who accused the company of misleading them through an boomerang deal to inflate its revenue, Law360 reported.
U.S. Magistrate Judge James B. Clark III gave the initial nod to the proposed settlement on Oct. 10, setting the stage for a final approval hearing on Jan. 28, 2025, according to court documents filed last week in the U.S. District Court for the District of New Jersey.
The settlement would resolve allegations that Aurora engaged in a $21.7 million “round-trip sale” with Radient Technologies Inc., a Canadian extract maker it had a financial stake in, to artificially boost its revenue and meet positive EBITDA projections.
Lead plaintiffs Doug Daulton, Francisco Quintana, Donald S. Parrish and Quang Ma filed the class action lawsuit in 2019, accusing Aurora of violating U.S. securities laws. The case has progressed through multiple amended complaints and motions to dismiss over the past four years.
“The settlement is a very good result for the settlement class, particularly when viewed in light of the procedural history of the case and the risks of proceeding through further litigation,” the plaintiffs’ attorneys wrote in the court filing.
The settlement would cover investors who purchased Aurora’s common stock on the New York Stock Exchange between Oct. 23, 2018, and Feb. 28, 2020.
According to the court documents, the plaintiffs allege that Aurora’s omissions caused its stock to trade at artificially inflated prices during this period. They claim investors suffered economic harm when the truth about the company’s practices was “revealed through a series of corrective disclosures.”
Aurora has consistently denied any wrongdoing.
The proposed settlement was reached after extensive arm’s-length negotiations, including a full-day mediation session in March, the court filing noted.
If granted final approval, the $8.05 million fund would be distributed to eligible class members after deducting court-approved fees and expenses. Plaintiffs’ lawyers said they would seek fees up to 25% of the settlement amount and $150,000 in expenses.
The settlement comes as the firm tries to situate itself overseas amid oversupply and other issues in the North American cannabis market. Aurora recently posted better-than-expected revenue of C$83.4 million, up 12% over the year, and positive free cash flow of C$6.5 million. The company’s been focused on its medical cannabis division, which accounted for 57% of total net revenue.
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