Cannabis Entrepreneur Says He Was 'Hoodwinked' in Merger Deal

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A Burlington cannabis entrepreneur is suing the Canadian company he merged his company with as part of a $25 million deal in 2021. Shayne Lynn of High Fidelity claims that executives at Toronto-based SLANG Worldwide “used unlawful sharp practices to hoodwink” him about the state of SLANG's financial condition before taking over his company. Filed in Vermont Superior Court last month, the suit accuses SLANG, its cofounder and former board chair Peter Miller, and its former CEO Christopher Driessen of fraud and negligent misrepresentation related to the deal. Lynn once held two of Vermont’s five medical marijuana licenses and operated stores under the name Champlain Valley Dispensary and Southern Vermont Wellness. He later changed the name to CeresMED, which operated under a parent company, High Fidelity. SLANG started pursuing Lynn’s company shortly before Vermont’s legislature legalized cannabis for recreational use, the suit says. Under the new law, Lynn, as a medical cannabis retailer, was entitled to what is known as an integrated license, which would allow him to open a store several months before the general public. The head start would give Lynn’s company “a significant economic advantage over potential competitors” and “establish a distinctive brand and market share before competitors commenced operations,” the suit says. SLANG, a publicly traded company, buys and sells licenses for cannabis edibles and accessories. Executives told Lynn the company “was financially sound and had a bright economic future,” the suit says, and they promised Lynn $18 million to finance his plans for growth. Much of the merger deal involved stock options, meaning SLANG’s success was critical for Lynn’s High Fidelity shareholders to make any money. Yet even as the sides negotiated, SLANG executives were aware the company “was losing money and would not survive without an influx of cash to support continued operations,” the suit says. The acquisition of “valuable assets” such as Lynn’s company, according to the suit, would be attractive to lenders. Lynn, meanwhile, was offered only “materially misleading” public documents about the financial health of the company and was unaware it was “teetering on the edge of insolvency.” After the deal closed, Lynn was named head of SLANG Vermont and was given a seat on the company’s board of directors. The company also retained Bridget Conry, another top CeresMED executive. Only then was Lynn made aware of SLANG’s financial distress, the suit says, when the company disclosed at a board meeting that it needed to borrow $18 million to survive. A corporate restructuring firm was ultimately brought in and started cutting costs, including through layoffs. And months after the merger, in March 2022, Lynn was fired, Conry was laid off, and SLANG shelved plans to expand the grow operation at the company’s Vermont headquarters in Milton. “The failure to make disclosures and the misrepresentations by Defendants caused Mr. Lynn to agree to the Merger Agreement,” the suit says. “Had he known the true financial status of [SLANG], he never would have agreed to merge with it.” Lynn did not respond to a request for comment. His attorney, Pietro Lynn, said in a statement that “we are confident that Shayne will prove the factual allegations and that he will prevail in the litigation.” Lynn and Conry are preparing to open a retail cannabis shop of their own — High Fidelity — on Cherry Street in Burlington. SLANG Vermont, meanwhile, opened Ceres Collaborative not far away on College Street in Burlington last October. It’s one of the more successful cannabis shops in the state and, according to SLANG Worldwide’s recent financial statements, the only profitable arm of its multistate business ventures. SLANG did not immediately respond to requests for comment.