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CGC.US
id: 1554
Canopy Growth ($CGC) Misleading Cost Efficiency and Product Rollout Case
E.D. New York
Court1:25-cv-01877
Case number05/31/2024
Class period Start02/06/2025
Class period End06/03/2025
Lead Plaintiff motion deadline- $CGC investors filed a claim against Canopy Growth for misrepresenting production costs and overstating the strength of its profit margins.
- After reporting a major earnings miss tied to hidden costs from its Claybourne pre-roll launch and shipping issues, $CGC dropped 27.3% on February 7, 2025.
Case Details:
Between May 30, 2024 and February 6, 2025, Canopy Growth promoted its cost-efficiency strategies and claimed it was on a clear path to profitability. Executives frequently pointed to margin improvements from its Storz & Bickel vaporizer brand and automation of pre-roll production as key drivers of success.
At the same time, the company announced a major product expansion through a licensing deal with Claybourne, launching high-end pre-rolled joints in Canada. Canopy described the rollout as artisanal and premium but failed to disclose the significant costs associated with manufacturing and shipping these products. Internal shipping costs related to Storz & Bickel were also rising, despite claims to the contrary.
Throughout multiple quarterly filings and earnings calls, Canopy continued to assert that its gross margins were improving and that its FY2025 profitability targets were on track.
On February 7, 2025, Canopy reported a 400 basis point drop in gross margin, citing high production costs from the Claybourne launch and shipping-related indirect costs. The company also posted a loss of C$1.11 per share, missing analyst expectations by more than double. $CGC fell 27.3% in one day on the news.
Based on these events, $CGC investors filed a claim against Canopy Growth, accusing the company of the following:
- It misled investors by overstating margin strength and hiding key product-related costs.
- It promoted the Claybourne launch and vaporizer segment as profitable while knowing internal expenses were rising.
Considering all the representations, investors believe Canopy concealed material financial risks to maintain its stock price and delay revealing underperformance.
Case Status
Lead Plaintiff Appointment
Alleged Offence
Misleading Statements,
Failure to Disclose,
Omissions
Suspected Party
Directors,
Management
Security Type
Stocks
Trade Direction
Long
Shock Event Date
02/07/2025
Filing date
04/04/2025
Lead Plaintiff Deadline
06/03/2025