iAnthus Nevada Acquisition Target Sierra Well Sued by Former CEO for Fraud

iAnthus Capital’s (CSE: IAN) Nevada acquisition target Sierra Well has found itself in some hot water. The firm is being sued by former Chief Executive Fernando Leal for breach of contract, fraud, wrongful termination, and conspiracy related to his termination prior to the announcement of the acquisition by iAnthus Capital. iAnthus originally announced the acquisition of Nevada-based Sierra Well in September.

Leal is claiming that his termination, which was reported to be without cause, was conducted as a means of reducing his ownership interest before the acquisition was announced. His allegations pertain particularly to director and part owner Steven Nightingale, who originally recruited Leal in 2015 for the role of CEO. He was originally promised a salary plus a 10% stake in the company according to the lawsuit filed.

Now, Leal is claiming that the equity position in Sierra Well was never provided to him, and his sudden termination was a result of Nightingale attempting to avoid paying Leal what was rightfully his. Leal claims that numerous attempts at getting the equity position in writing were avoided by Nightingale. The result, according to the lawsuit filed, is over $5.5 million in damages.

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Also in dispute is whether Leal was terminated before or after discussions had begun in relation to the sale of Sierra Well to iAnthus Capital Holdings. Leal claims that the discussions had begun prior to his departure, while internal documents show otherwise. As a result, Leal is claiming internal documents were falsified to deprive Leal of his equity position.

iAnthus Capital announced on September 19 that it would be purchasing Sierra Well for US$27.6 million. The purchase is to include both of Sierra Well’s dispensaries, located in Reno and Carson City, as well as a 20,000 square foot cultivation facility. At the time, it was reported that the firm was operating with annualized revenues of US$16 million based on the previous quarters performance.

The acquisition, set to close in early 2020, will result in the dispensaries being renamed to iAnthus’ flagship “Be.” brand. However, that may be delayed as a result of Nevada Governor Steve Sisolak temporarily halting the transfer of all marijuana business licenses.

iAnthus Capital last traded at $1.60 on the CSE.

Information for this briefing was found via Sedar, Reno Gazette Journal and iAnthus Capital Holdings. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.