Adam Jackson
Cannabis and tobacco biotech firm 22nd Century Group Inc. (Nasdaq: XXII) has reached a preliminary settlement in a class-action lawsuit involving investors accusing the company of hiding a Securities and Exchange Commission investigation.
Investors claimed 22nd Century and its officers knowingly paid authors to publish articles to artificially boost the company’s stock while facing severe financial challenges. They also allege the company concealed an ongoing SEC investigation into its accounting practices, causing a stock plunge when the inquiry surfaced.
The $3 million settlement received a preliminary nod from New York Magistrate Judge Michael Roemer last Thursday, with investors describing the deal as an “excellent resolution.” The payout is approximately 6% of the potential recoverable damages, as estimated by the investors, according to Law360.
In a separate development, 22nd Century announced that it had secured definitive agreements for the sale and purchase of 11.2 million shares of common stock and warrants in a registered direct offering priced above market, the company announced Tuesday. The transaction, priced at $0.47 per share, is expected to generate gross proceeds of $5.3 million for the company before deducting fees and other offering expenses.
Matt Kreps, head of investors relations for the company told Green Market Report that the offering is not a result of the settlement ruling.
The company said that the raised funds will support the expansion of 22nd Century’s VLN reduced nicotine tobacco cigarettes in new markets, working capital related to its commercial activities, and general corporate purposes.
In a statement, CEO James A. Mish expressed optimism about the company’s growth prospects, indicating that the firm is “tracking to our full-year outlook of $105 to $110 million in sales.” Mish said the company expects to be cash positive by 2024.
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