DISCIPLINARY DECISION NOTICE
||Love Hemp Group PLC (“Love Hemp” or the “Company”)
||25 August 2022
For the reasons given in this notice, Aquis Stock Exchange (“AQSE” or “the Exchange”) has censured and imposed a financial penalty on Love Hemp in the sum of £100,000, which has been discount to £70,000 for early settlement.
- The Company was admitted to AQSE in September 2019 as World High Life PLC, changed its name to Love Hemp Group PLC in March 2021 and operates the Love Hemp CBD products brand.
- The relevant events which gave rise to the censure are, as follows:
- On 8 February 2022 the Company released an announcement stating it had completed a fundraise of £2.060m. Certain participants in the fundraise had delayed settlement terms and this resulted in the full amount of the proceeds of the fundraise not being due to the Company for 20 days following the announcement.
- The information set out in this announcement in respect of the completed fundraise could be seen as false or deceptive and it omitted key information, which might have given a misleading impression to investors of the Company’s financial position, as it did not make clear that certain participants in the fundraise were on delayed settlement terms and the funds had not been received by the Company at the time of the announcement.
- The Directors of the Company maintain that during the period they had no reason to believe that settlement would not be forthcoming on the due date due to the previous performance of the investor in question. However, one investor for £1.2 million did not remit the funds as contracted.
- The Company failed to update the market on the investor’s failure to make payment on the due date and its ongoing attempts to secure the unpaid funds until 3 May 2022. As such, investors had a false impression of the Company’s cash position from the beginning of February until early May 2022.
- The Company’s procedures, systems and controls were insufficient to ensure that the announcements were completely accurate. The Company maintains the Directors made a judgement decision to allow the investor to attempt to complete the subscription despite the due date having passed, however, the Company failed to make announcements and inform the market in a timely manner of its decision and the potential impact this may have had, nor was it able to provide any documentation (such as board minutes) to support its representations to AQSE in response to the Exchange’s enquiries.
- The Company’s decision to work with the investor and not inform the market with respect to the delays and subsequent cancellation of the investment is a failure on the part of the Company to keep the market informed and this had a negative impact towards its shareholders and potential shareholders.
- APPLICABLE RULES:
Provision of the AQSE Growth Market Rules Access Rulebook replied upon, as follows:
AQSE Rule 4.1: Market Abuse Regulation
An issuer must comply with:
(1) the Market Abuse Regulation, as applied to an issuer of securities admitted to an SME Growth Market….
AQSE Rule 4.2: Misleading Information not to be published
An issuer must take all reasonable care to ensure that any information it announces is not misleading, false or deceptive and that any announcement does not omit anything likely to affect the import of the information.
AQSE Rule 3.3: Procedures, Systems and Controls
An issuer must take reasonable steps to establish and maintain adequate procedures, systems and controls to enable it to comply with its obligations under these rules and to ensure that its directors understand their responsibilities and obligations as directors.
AQSE Rule 3.5: Integrity
An issuer must act with integrity towards the holders and potential holders of its securities and avoid impairing the reputation and integrity of the Exchange.
In respect Rule 4.1 of AQSE Rulebook, the following articles of the Market Abuse Regulation are considered relevant:
A person shall not engage in or attempt to engaged in market manipulation.
Article 17 (1)
An issuer shall inform the public as soon as possible of inside information which directly concerns that issuer.
The issuer shall ensure that the inside information is made public in a manner which enables fast access and complete, correct and timely assessment of the information by the public…
- TIMELINE OF EVENTS
|8 February 2022
||Love Hemp enters into a subscription deed with an investor in the sum of £1.2 million, with payment due on 7 March 2022.
|8 February 2022
||Love Hemp announces “completion” of a £2m fundraise and issues and allots shares in Love Hemp to all investors, including the investor in question.
|7 March 2022
||The investor failed to deliver the funds due in accordance with the subscription deed.
|31 March 2022
||Love Hemp announces its interim results, including a statement that “The cash position of the Company has been significantly improved following the post-period financing announced on 8 February 2022 with a total of £2.060m being raised.”
|28 April 2022
||The Love Hemp board decides to unwind the allotment of shares to the investor.
|29 April 2022
||Love Hemp informs its AQSE Corporate Finance Adviser, Peterhouse Capital Limited (“Peterhouse”) that the investor has failed to delivery payment when due.
|2 May 2022
||Peterhouse resign as AQSE Corporate Adviser to Love Hemp and trading in the Company’s shares are suspended.
|3 May 2022
||Love Hemp announced the failure of the investor to deliver the funds due.
- NATURE AND EFFECT OF BREACHES
- Rule 4.2 of the AQSE Rulebook requires an issuer to take all reasonable care to ensure the information it announces is not misleading, false or deception and does not omit anything likely to affect the import of the information. On 8 February 2022, Love Hemp announced the fundraising was complete, however the investors obligations to pay the subscription sum was yet to be discharged. Accordingly, Love Hemp’s announcement that it had successfully completed the fundraise was in breach of Rule 4.2.
- The announcement of 4 March 2022 also stated the Love Hemp had completed a successful £2.060 million fundraise and on 31 March 2022 the statement stated that “The cash position of the Company has been significantly improved following the post-period financing announced on 9 February 2022 with a total of £2.060m being raised”. Again, these announcements are in breach of Rule 4.2 of the AQSE Rulebook.
- As a consequence of Love Hemp’s initial announcement regarding the fundraise and of its failure to clarify and / or correct the announcements made between 8 February and 3 May 2022, investors may have believed that the Company had secured £2.060m when the Company had received less than that.
- In addition, Rule 3.3 of the AQSE Rulebook requires Love Hemp to take reasonable steps to establish and maintain adequate procedures, systems and controls to enable it to comply with its obligations under the rules. The continued representation in announcements regarding a completed fundraise, including in key announcements of interim results and statements are indicative of a failure to maintain adequate controls over the review and accuracy of price sensitive information.
- Rule 3.5 of the AQSE Rulebook requires Love Hemp to act with integrity towards the holders and potential holders of its securities and to avoid impairing the reputation and integrity of the Exchange. Love Hemp breached this rule when it delayed in updating the market of the failure of the investor to complete.
- REMEDIAL ACTION
- The Exchange notes Love Hemp has pro-actively responded to these events by increasing the independence and strength of its Board with the addition of experienced non-executive directors; Graham Mullis (February 2022) and Anthony Dyer (July 2022) and the appointment of a new company secretary, James Martin (July 2022). Love Hemp has also committed to engage more closely with its AQSE Corporate Finance Adviser to ensure decisions are taken, and judgements formed, with the benefit of third-party review and advice.
Any questions regarding this Notice should be addressed to: email@example.com
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