April 20 2023,
THE BIG IDEA
Hope everyone had a fun and prosperous 4/20.
In today’s newsletter:
- Suit alleges “pervasive self-dealing” by Berner and team
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WHAT YOU MISSED IN WEEDWEEK CALIFORNIA PRO
EXCLUSIVE: Facing lawsuits, Berner vows to fight for Cookies
On 420-eve, Cookies’ founder and CEO Berner posted a video to his 2M Instagram followers. Last year as he publicly fought colon cancer, he revealed that he was also privately fighting for his company.
“When I got sick, I think that a group of predatory investors saw a good opportunity to make a move on me and the leadership over at Cookies,” he said from his Couch Locked Network studio. “They have attempted to sabotage my name and everything…”
What should the cannabiz do about Delta-8?
In late March, Kentucky Gov. Andy Beshear (D) legalized MED in the Bluegrass State.
A week earlier, Beshear had signed another cannabis-related bill to regulate the intoxicating, hemp derivative (IHD) Delta-8 THC (D8). The bill, which passed the Kentucky legislature unanimously, directs the state to establish a lab-testing and approval process for D8, and requires buyers to be 21+.
Largely immune to the federal illegality that holds back the cannabis industry, Delta-8 is proving to be a significant competitor to regular old (Delta-9) THC. Some state industries are trying to crack down.
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MORE FROM THE COOKIES LITIGATION
Yesterday, WeedWeek was first to detail lawsuits alleging “pervasive self-dealing” by Berner and some members of his team at Cookies. Berner has called allegations against him “fucking bullshit,” but the company has not commented further. The filing also appears to make allegations about the Series A fundraising Cookies announced last week.
In last year’s Berner cover story, Forbes estimated Cookies’ value at $150M.
- (The figure doesn’t include the Cookies clothing brand which Berner has said does $50M+ in annual sales.)
- “Based on revenue, and growth, and potential growth…we’re definitely a billion-dollar company,” Berner told Business Insider last year.
Last week, Cookies said it had raised an undisclosed amount of Series A equity financing at the company’s highest ever valuation, also undisclosed. New investor Entourage Effect Capital led the round. Existing stakeholder 12/12 Ventures, a defendant in the investor lawsuit, followed in.
- The lawsuit says Berner and Cookies president and director Parker Berling are both investors in 12/12.
According to the complaint, filed in California court by Cookies investors BR Co. and NedCo, the Series A represented a “doubl[ing] down” after Cookies entered a $5M note agreement with San Diego-based Entourage, allegedly “without getting the necessary corporate approvals.” (The Series A was announced publicly after the court filing which describes it.)
“The taking on of more debt is representative of Defendants’ [Berner and members of his team] reckless spending, that is out of proportion with its ability to pay,” the complaint alleges. (Entourage didn’t respond to requests for comment.)
- According to the complaint, Cookies says it sold $23M in Series A preferred stock to investors who were either unidentified or affiliated with the defendants.
- The complaint further alleges that Cookies proceeded with the Series A over assertions by a Cookies investor to convert its note into Series A preferred stock. Cookies “reckless” refusal to recognize the conversion and moving forward with the Series A “will result in yet further losses to Cookies” and its shareholders, the complaint alleges.
According to the complaint, Cookies says the Series A was approved by its “disinterested” directors. The complaint alleges “there was no ‘disinterested’ board member review or approval.”
It says the deciding third vote came from defendant Lesjai Peronnet Chang who it alleges “admitted he was pressured” by Berner and [Cookies president Parker] Berling into approving the deal. “Chang further acknowledged he had not had time to read the [Series A] documents but nevertheless voted to approve the transaction,” the suit alleges.
- In disclosure documents relating to the deal, plaintiffs allege the defendants “admitted to dozens of instances of self-dealing” and that the company has never been audited.
- Cookies “categorically refused” to undergo an independent investigation or audit, the complaint alleges.
- The complaint alleges the Series A aims “to dilute plaintiffs’ interests in Cookies for Defendants’ benefit and so that the Defendants can continue their pervasive self-dealing” and sideline dissenters.
- Rep. Earl Blumenauer (D – Ore.) introduced a bill to end industry-hated tax rule 280E.
- MSO Trulieve settled a racial bias suit.
- Cannatech Dutchie, which provides online menus for thousands of shops, went down on 4/20.
Green Market Report
- On 420-eve workers organized by the Teamsters struck at three Green Thumb Industries shops in the Chicago area.
- A new survey from EY more than half of the industry will need funding in the next 12 months.
- The National Association of Realtors found a decline in commercial property purchases by cannabis companies.
- New Jersey regulators quickly reversed a decision to suspend MSO Curaleaf‘s license.
- Colorado-based MSO Schwazze is acquiring the Standing Akimbo dispensary in Denver.
- Forbes released its annual list of the most influential people in weed.
- GoPuff said it would start delivering Dad Grass CBD joints across 18 states.
State and local:
- With REC bills on his desk, Delaware Gov. John Carney suggested he may reluctantly sign.
- Florida’s hemp industry cheered after lawmakers removed Delta-8 caps from a bill.
- Why is New Jersey weed among the most expensive in the country?
- San Francisco’s Chinese-American community is split over a proposed pot shop.
- Journalist Sam Quinones argues only one thing will solve the fentanyl crisis.
Fun and interesting:
- The New Yorker introduces some 19th century psychonauts.
- Where were you during the Dope Famine of ’86?
- My “stoner alter-ego name” is apparently Pyongyang Gushers. What’s yours?