Namaste Technologies Inc. (NXTTF) has fired CEO Sean Dollinger and could be reviewing selling the company. The Canadian-based cannabis company said that following an investigation by a Special Committee of the Board of Directors, the Board terminated Dollinger for cause and removed him from his position as Director, effective immediately. The company has appointed Meni Morim as its interim CEO and also appointed Darren Gill as Chief Strategy Officer.
Special Committee Investigation
Namaste came under a short seller attack by Citron Research in October 2018 which caused the board to form a Special Committee to investigate the allegations. The only one that was substantiated and required action according to the company was related to the sale of Namaste’s US subsidiary, Dollinger Enterprises US Inc., in 2017, and subsequent transactions involving its assets and companies in which Sean Dollinger and Namaste’s head of marketing David Hughes have a beneficial interest, as well as breaches of fiduciary duty by Sean Dollinger and evidence of self-dealing. The company said it is also taking legal action against Dollinger for damages and disgorgement.
Citron accused Namaste in saying it was planning on listing on NASDAQ in order to bring in investors. “Fake claim of a Nasdaq Listing to get investors to buy the stock. Mr. Dollinger has promised investors a Nasdaq listing and the simple takeaway that comes with it, a higher share price on the back of an up-listing.”
Next, it claimed there was an issue with the sale of Dollinger Enterprises US, which it seems turned out to be true. “With the hope of obtaining the NASDAQ listing on Nov 28, 2017, Namaste announced that it divested of its US assets, Dollinger Enterprises US Inc. Just to be clear, Dollinger said he sold this asset to an arm’s length party… but it was really sold to David Hughes who has been with Namaste since Feb 2015 (and Paul Burn who has been with Namaste since 2016) – can investors trust anything Dollinger says going forward? Namaste has lied to its shareholders, Canadian Regulators, US Regulators; and most of all has attempted to hide US assets from the Justice Department in an attempt to obtain a US listing.”
The report went on to say, “And just in case you say…NOOOO this can’t be our CEO who would do this…just
remember this is the same guy who just three years ago raised money based on the underlying promise of guaranteed returns…the SEC would have nailed him for this but he was living in the Bahamas.”
Strategic Review Process Initiated
The company also stated that the board had initiated a formal strategic review process to consider all value-maximizing alternatives, which could include exploring a potential corporate transaction that may, but not necessarily, result in the sale of the company. “We are in the process of engaging an investment bank to advise a Special Committee of the Board overseeing the process,” read the statement.
The company went on to state, “Namaste remains in a strong financial position, with cash balances intact, and will continue to execute on its unique and effective business strategy.”
Citron has suggested that the company’s real valuation should be $0.26 a share and the company is currently trading at $1.04.
Things started to go downhill for Namaste in September of 2018 when the company held a “pledge party” stockholders who promised not to sell company shares for 90 days. The party featured women dressed as sexy nurses to sign up patients for its telemedicine portal. The party though was in Quebec which bans telemedicine. Tilray (TLRY) had just signed an agreement with the company but immediately terminated it upon hearing about the party and the promotional activities.