Recently, short seller Grizzly Research released a report attacking leading cannabis company Trulieve Cannabis (TRUL) (TCNNF). The report accused Trulieve of being a fraudulent company. Following this report, Trulieve’s management team released a statement claiming the accusations were false and an attempt to cause its share price to nosedive. The stock price declined by almost 20% on the same day.
Grizzly’s research report
The Grizzly report listed many of its findings related to Trulieve. The short seller group claims to have drone footage to prove that a large portion of Trulieve’s cultivation space consists of hoop houses. The cannabis products produced in hoop houses are prone to damage due to weather and infestation. Grizzly also reported that Trulieve has extensive ties with North Florida corruption.
Grizzly also alleged that Trulieve had received its initial license through corruption and that the company had multiple conflicts of interest that weren’t disclosed to shareholders and investors. Trulieve CEO Kim Rivers’ husband, JT Burnette, is the company’s construction partner. Several related deals suggest that Burnette’s construction company sold properties to Trulieve with huge margins. The research report also suggests that Trulieve hasn’t disclosed the nature of its creditors and that some of its lenders can be traced back to insiders. Most of these lenders are shell companies that don’t have any other operations. Grizzly claims that it’s suspicious about what other information the company is hiding.
In addition to all this, the research report suggests that Truelieve may not be as profitable as it portrays. The company reported profits based on margins on its production. In light of the research findings, Grizzly is skeptical about the company’s profitability. As of now, Trulieve faces heavy competition in the US cannabis market. Grizzly believes the company may not be able to survive with its low-quality products.
Following Grizzly’s report, Trulieve released a statement on the same day. The company’s management reported that the claims by Grizzly Research were misleading, false, and defamatory. Trulieve believes that several analysts support the company’s successful business models. Trulieve serves around 230,000 registered patients in Florida, and the company claims it has never been questioned about the quality of its products.
The company’s management believes that the report is a dishonest attempt at affecting its stock price. They’ve appealed to investors to consider the credibility of the source of the report, as it’s a short seller that has no experience judging cannabis companies. Management also revealed its plan to take legal action against Grizzly Research.
Rivers said, “We ask that our investors be aware that the Report reflects the opinions of an acknowledged short seller, whose sole interest is in profiting from a decline in the price of the Company’s shares. I have full confidence in our management team and their abilities to continue to serve our customers rather than distracting themselves by these baseless allegations.”