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Namaste Technologies Inc. is weighing a sale after firing its chief executive for alleged wrongdoing related to recent deal-making.
The Vancouver-headquartered cannabis company said Monday in a news release that its board has terminated CEO and director Sean Dollinger after an internal investigation found that Mr. Dollinger allegedly breached his fiduciary duty to the company and improperly enriched himself. The company took issue with asset sales, including the 2017 sale of Namaste-owned Dollinger Enterprises US Inc. for US$400,000, to entities in which Mr. Dollinger and another senior executive have a beneficial interest, the Namaste news release claims.
Mr. Dollinger’s ouster comes after Namaste struck a special committee of two directors last year to delve into claims by activist short-seller Citron Research, which took aim at the company last October in a report alleging fraud.
Namaste is one of several marijuana companies that have been targeted in recent months by activist short-sellers who have criticized governance practices and company valuations amid a steep rally in share prices. Other firms that have been attacked include Aphria Inc., Aurora Cannabis Inc., Tilray Inc. and Cronos Group Inc.
In a statement sent to The Globe and Mail by a spokeswoman, Mr. Dollinger said that he intends to fight the allegations and will continue to support Namaste as its largest shareholder. Mr. Dollinger also indicated his intention to remain on Namaste’s board, despite the company’s statement which said he had been removed as a director, effective immediately.
“I intend to take immediate legal action to begin setting the record straight and clearing any misconceptions caused by the inaccurate allegations levelled against me,” Mr. Dollinger said in his statement.
The company said in its statement that it also intends to launch legal action against Mr. Dollinger.
Namaste is publicly listed on the TSX Venture Exchange and has a market capitalization of about $362-million. Shares of Namaste tumbled 14.5 per cent on Monday to close at $1.18. In the past 12 months the stock has traded as high as $3.94.
The company started in 2014 as an online retailer of cannabis accessories, amassing a portfolio of 30 websites in more than 20 countries. Australia and Britain are its biggest markets, followed by Canada and Brazil. It also owns CannMart Inc., the first company licensed by Health Canada to sell cannabis that is grown by other producers to medical patients.
Law firm Miller Thomson LLP was hired by the special committee for legal advice. Miller Thomson retained Ernst & Young LLP to investigate the allegations levelled by Citron.
Namaste said that it has launched a strategic review and is weighing a sale. It is looking to hire an investment bank to advise the special committee of the board, which is overseeing the process in addition to looking into the Citron allegations. In the meantime, the company has appointed Meni Morim as interim CEO and Darren Gill as chief strategy officer. Mr. Morim served as chief product officer and director of artificial intelligence, while Mr. Gill had been vice-president of strategic operations.
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