Investors Sue Parallel and Beau Wrigley call it a Ponzi scheme
In early March, a lawsuit was filed in the Supreme Court of New York County and the Southern District of Florida. Then, almost immediately, the court documents were heavily redacted. It looks like some investors in the privately held Surterra Wellness, now known as Parallel, are pretty angry about what happened to their investment dollars. Although some parts remain unclear, there is still much to learn from the complaint and the allegations. Both cases suggest Wrigley burdened Parallel with excessive debt and misrepresented the health of the cannabis company. The complaint alleges that his goal was to take the company public through the Ceres Acquisition Corp SPAC and then exit at a profit.
Parallel is a cannabis company formerly known as Surterra Wellness and has built its market share in Florida, among other states. According to Florida OMMU, Surterra’s market share in the medical-only state has fluctuated between 9% and 5.9% over the past year. SH Parent is the parent company of Parallel/Surterra.
William “Beau” Wrigley, Jr. is the heir to the chewing gum company and served as the CEO of Wm. Wrigley Jr. Company until it was sold in 2008 to Mars Inc. for $23 billion. He is President and Chief Executive Officer of WWJR Enterprises and has controlled PE Fund at all relevant times. Wrigley originally invested in the company in 2017 and assumed day-to-day operations as Chairman and CEO at the end of 2018. Wrigley stepped down as CEO effective November 19, 2021, after the disclosure of defects under of the ticket purchase agreement and continues to serve as Chairman of the company. James Whitcomb is the current CEO of the company and is named in the Florida case.
The case of Florida
The Florida case lists plaintiffs as Tradeinvest Asset Management Company (BVI) Ltd., First Ocean Enterprises SA and Techview Investments Ltd. and defendants like Wrigley, Jr., James “Jay” Holmes, James Whitcomb, SH Parent Inc. d /b/a Parallel, Surterra Holdings Inc., Green Health Endeavors (another Wrigley family fund), PE Fund LP and Robert “Jake” Bergman. This case alleges that Wrigley convinced plaintiffs to invest in a Simple Agreement for Future Equity, or SAFE. A SAFE is a relatively new type of security in which an investor’s cash investment is generally converted into shares of the issuing company under the conditions specified in the SAFE. They are often issued to provide a business with bridge financing until it can complete an additional capital raise or sale. of the company, and will often be converted into equity in the event of the occurrence of this specified future event. They say they sent the money to the company on September 27, 2021. Although much is redacted, it is alleged that the investors were misled and that if they had been told the truth, they probably would not have not made the SAFE investment.
While it’s hard to really know what’s in the complaint, it seems to infer that Parallel was aware the Ceres SPAC deal was in trouble as it convinced SAFE investors to send the money. . The case notes that “on October 1, 2021, the company sent an email, on behalf of Wrigley, to investors in the company explaining that the company was no longer pursuing the SPAC transaction. Among other things, it noted that the company would “focus on alternative funding avenues to pursue a broad range of growth opportunities” and that the company had just “raised and closed a significant initial private markets equity financing,” referring to the safe-deposit box. strong.” In other words, Parallel would likely have known on September 27 that the Ceres deal was in trouble since the company announced a few days later that it was over.
The complaint alleges that after the Ceres deal fell through, Wrigley and Parallel tried to tell investors that the deal fell through because the company was worth more and “cannabis industry players turned on their phones.” .
Investors say in the complaint that they finally got access to the company’s documents in December and learned that the details were inconsistent with what they had been told for the SAFE investment. The case says: “The practice of raise funds under false pretenses, is the essence of a Ponzi scheme.
The case of New York
This case involves John and Ultima Morgan, TGHI II LLC, Prime Overseas Investments and Enterprises Ltd. and Techview Investments Ltd. and they allege that Surterra Holdings Inc. dba Parallel, SH Parent Inc., PE Fund LP, WWJr. Enterprises Inc., William “Beau” Wrigley, Jr., SAF Group, and GLAS Americas LLC allowed Wrigley to falsely set up the business so that it would be taken over by a special purpose acquisition company and then he could cash out. The plaintiffs all hold Senior Notes in the company.
PE Fund is an investment vehicle within Wrigley’s family office empire. It is directly or indirectly controlled by Wrigley and is jointly owned with other entities controlled by Wrigley. WWJR Enterprises is the general partner of PE Fund. WWJR Enterprises is named after Wrigley’s initials and is controlled by Wrigley. SAF is a global alternative investment manager based in Canada and holds a junior rating.
The complaint alleges that since Wrigley took over management of the company, it has incurred significant debt. The amount of Parallel’s debt is redacted in the court documents. The case indicates that “the current capital structure of the company consists of several tranches of debt with different priorities.” The case also alleges that Wrigley improperly placed himself on both sides of the debt negotiations. Investors complain that Wrigley “repeatedly botched its own projections, ultimately ruining the company’s credibility and its chances of going public.”
Street Insider released a copy of the Parallel game associated with the Ceres SPAC deal and it comes with pretty high projections. The projected net revenue for 2021 was $447 million. The presentation said the company had $348 million in debt. The company also said in the presentation that it posted a net loss of $140 million in 2020. Growjo.com Estimates Parallel’s annual revenue is $65 million per year, but since the company is private, this figure cannot be verified.
The court document goes on to say, “On February 22, 2021, the company announced that it planned to go public by merging with Ceres Acquisition Corp., a Special Purpose Acquisition Company or SPAC. After numerous unsuccessful efforts to keep the deal alive, on September 30, 2021, the deal was canceled due to investor concerns over “Parallel’s ability to meet the high financial projections it provided in February” .
The case also suggests that Holmes, PE Fund and Wrigley were negotiating terms of the company’s debt that would benefit them and described as terms that would ‘make a loan shark jealous’.
Class attorneys did not respond to a request for comment.