The American former chairman of a Canadian wellness company and CBD producer has been fined $115,000 in an insider trading case.
John M. Moretz, who served as chairman of Neptune Wellness Solutions, Inc. from 2017 to 2022, is also barred from serving as an officer or director of a public company for three years under a settlement with the U.S. Securities and Exchange Commission (SEC).
Without admitting or denying the SEC’s findings, Moretz consented to an order that found he violated the Securities Exchange Act of 1934 by tipping inside information ahead of a 2019 acquisition by Neptune.
Deal is leaked
According to the SEC, the wife of a close Moretz friend bought Neptune stock based on an announcement that Moretz disclosed before the information was made public. The company, traded on the Nasdaq exchange, eventually announced that Neptune had acquired SugarLeaf Labs, Inc., a hemp extraction company located near Hickory, North Carolina.
The SEC found that the woman, unidentified in the SEC order, opened an individual brokerage account through which she bought Neptune stock on May 9, 2019, before the public announcement later that day. She reportedly mentioned to her stock broker that Neptune “owned” a hemp facility in Hickory although Neptune had not yet acquired SugarLeaf and negotiations over the purchase were non-public at that time.
The woman also told her broker that Moretz had told her husband that Neptune’s stock was going to increase from $3.50 per share to $12 per share.
According to the SEC’s ruling in the case, the woman began accumulating the Neptune stock against her broker’s advice and continued purchasing shares after the announcement, ultimately acquiring approximately $500,000 in shares over the next three months as the only stocks purchased through her new account. The shares increased in value by $78,618, the SEC said.
Local hero
The SEC described Moretz as a lifelong resident of Hickory who is “widely known in the local area for having been a hall-of-fame football player at a local university and later building a successful textile business marketing celebrity lifestyle brands as well as for his philanthropic and charitable activities.” Moretz is the owner of Moretz Marketing, LLC, a national apparel marketing firm, and an event facility and restaurant in Hickory.
The husband who transmitted the inside information to his investor wife was Moretz’s “friend and former college teammate, who has also lived in Hickory for over 50 years,” according to the SEC.
Moretz began investing in Neptune in the early 2010s and ultimately acquired approximately 3% of the company’s outstanding shares, according to the SEC papers. He became a special advisor to Neptune’s board of directors in February 2014 and was elected to the board later that year. Moretz was named chairman of the company in 2017.
Gonna be big!
According to the SEC, Neptune Wellness, Laval, Quebec, started CBD production in 2019 after obtaining a license from Health Canada to produce and sell cannabis-related products to other license holders.
Moretz engineered the SugarLeaf acquisition later that year, after touting the deal to Neptune’s board as a “transformational” opportunity for the company that could increase the value of Neptune from $20 million to $100 or even $200 million. Moretz also requested additional stock options because he was taking on an expanded role in taking a “deep dive” into the potential of the target company.
Moretz eventually resigned as Neptune’s chairman in February 2022 after the company’s fortunes went south amid a drastic downturn in the global CBD market.
Nasdaq delisting
Neptune was delisted from the Nasdaq in March of this year because the company’s value dipped below the $2.5 million equity minimum, and because its stock price closed below $1 for 30 days in a row, both of which breach Nasdaq requirements.
At the time, Neptune management said “if the Company is unable to obtain funding in the near term, it may have to cease operations and liquidate its assets. These conditions cast substantial doubt about the Company’s ability to continue as a going concern.”
The company has since named board member Michael De Geus interim president and CEO following the departure of Michael Cammarata from those positions in February.
