Wayland Group Subject of Potential Securities Class Action – And It Just Might Have Teeth

Wayland Group (CSE: WAYL) announced after the bell Wednesday that it had been made aware of a statement of claim being filed against the firm in a proposed securities class proceeding. However, the issuer provided little detail beyond this information, aside from stating that it intended to defend the claim vigorously.

The claim, as reported by Wayland, is against the company, former CEO Ben Ward, and two financial institutions that the company engaged for capital raises in 2018. Upon a deeper look, it appears that shareholders rights law firm Morganti & Co., P.C., is the firm filing the claim against the company.

Specifically, the filing relates to the construction of Wayland’s facility in Langton, Ontario. The firm states that Wayland, formerly Maricann, claimed that the expansion was fully funded and on schedule for completion beginning in January 2018. However, the firm continuously pushed the scheduled completion date and instead indicated that they would require additional funding to complete the facility. Additionally, they also comment on the firm being subject to a cease trade order since May 6 due to Wayland’s inability to provide financial statements on a timely basis due to issues between the firm and its auditor, whom ultimately resigned.

Problems first began for Wayland in February 2018 when they had to cancel a proposed $70 million financing as a result of an investigation by the OSC into several directors whom were trading in the securities of Wayland prior to the announcement of the financing. Ben Ward, whom was CEO at the time, was also under investigation for an unrelated matter at a previous company he was employed at. Upon termination of the proposed financing by Eight Capital, the company reiterated that its operations were indeed fully funded.

The firm then conducted two raises later in the year, once in August and then again in October. While the first raise was indicated as being for working capital and general corporate purposes, the second raise upon closing was indicated to be for the purpose of continuing expansion at its Canadian facility.

Further to the above stated funding complications, Wayland appears to have been deceptive in stating when exactly the first phase of expansion was complete in entirety. On March 23, they indicated that the phase was complete in a news release, and that they now only required approval from Health Canada to commence cultivation. However, on December 24, they stated that not all rooms of the phase were yet complete – thus suggesting that the recent financing in which funded further expansion was likely still for the first phase of expansion.

Further to this, on April 23, 2018, Wayland announced that phase one of its Langton, Ontario facility was licensed by Health Canada. Later, they announced that phase one received further licensing on December 24 – suggesting that they may have deceived investors initially, whom were under the impression that the entire 217,000 square foot facility expansion was already licensed.

The result, is that the class action lawsuit to be filed by Morganti & Co. may contain some teeth – a rarity in a sector that has been consumed by ‘ambulance chasers’ as of late as share prices continue to decline. This securities claim instead appears to be focused on the actual operations of Wayland Group, and claims that they made to the investing public via the issuance of news releases and further filing.

While Wayland states that they will vigorously defend anything in which comes at them through the courts, time will tell whether or not they have a sufficient defense. The security remains halted as a result of Wayland Group being behind on its quarterly and annual financial statements.

Information for this analysis was found via Sedar and Wayland Group. 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.