Namaste Technologies Inc., a Canadian e-commerce cannabis company worth more than $400 million in market value, has fired its CEO Sean Dollinger following an internal investigation that was spawned by a short seller report alleging Dollinger had committed securities fraud.
The company’s stock plunged 21 per cent to $1.10 at one stage on the TSX Venture Exchange Monday following the news of Dollinger’s termination.
The former CEO was fired for “breaches of fiduciary duty” and “evidence of self-dealing” surrounding the sale and subsequent transactions of Namaste’s U.S. subsidiary Dolliger Enterprises U.S. Inc., where Dollinger and Namaste’s head of marketing David Hughes had a “beneficial interest” in.
Namaste also said it will be commencing legal action against Dollinger for “damages and disgorgement” in connection with the findings of the internal investigation.
The board appointed Meni Morim, who served as Namaste’s chief product officer and director of artificial intelligence as interim CEO, while it initiates a new strategic review process to evaluate all of Namaste’s assets, and explore the possibility of selling the company altogether. The company said it’s in the process of engaging an investment bank to advise a special committee of the board mandated to oversee the process.
“Namaste remains in a strong financial position, with cash balances intact, and will continue to execute on its unique and effective business strategy,” the company said in a statement, noting that it had not defined a timeframe to conclude the review.
The first whiff of scandal involving the Toronto-based company emerged just two weeks before Canada legalized cannabis for recreational use in October.
Short-seller Andrew Left, of Citron Research, published a report accusing Dollinger of lying to investors about divesting the company’s U.S. assets, but instead, selling it to company insiders — Hughes, and Namaste’s Head of HR Paul Burns — for a marked-up price. Left also accused Dollinger of misleading investors about a listing on the Nasdaq stock exchange, when the listing, in fact, never took place.
Dollinger also made headlines last year when he hosted a flashy “pledge party” of sorts in Montreal, headlined by the rapper Snoop Dogg, who is an investor in the cannabis space.
Dollinger was hoping to charm key investors into holding Namaste’s shares for a prolonged period of time, but instead, caught the attention of Health Canada for violating advertising and promotion restrictions.
Previous company news releases touted Dollinger as a “shrewd entrepreneur who has manoeuvred his career to a profitable path in the face of adversity.”
Neither Dollinger, Hughes or current CEO Morim could be reached for comment.