On Monday (July 8), Ontario-based CannTrust Holdings had some bad news for its investors – and its stock has plummeted ever since.
The Canadian company announced that it had received a compliance report from Health Canada which stated that its greenhouse facility in Pelham, Ontario was non-compliant with certain regulations.
The culprit, admitted CannTrust, was “the growing of cannabis in five unlicensed rooms and inaccurate information provided to the regulator by CannTrust employees”.
Initially, Health Canada put a freeze on any commercial activity at CannTrust concerning approximately 5,200kg of dried cannabis that was harvested in the unlicensed rooms.
In addition, CannTrust voluntarily froze activity concerning another approximately 7,500kg of dried cannabis equivalent.
“Our team has focused on building a culture of transparency, trust and excellence in every aspect of our business, including our interactions with the regulator. We have made many changes to make this right with Health Canada. We made errors in judgement, but the lessons we have learned here will serve us well moving forward,” said Peter Aceto, Chief Executive Officer.
“We made errors in judgement, but the lessons we have learned here will serve us well moving forward.”
Peter Aceto, CannTrust (pictured)
However, things then went from bad to worse.
Yesterday (July 11), CannTrust announced that it had “implemented a voluntary hold on sale and shipment of all cannabis products as a precaution while Health Canada visits and reviews its Vaughan, Ontario manufacturing facility”.
It added: “CannTrust is working closely with the regulator through the review process and expects to provide further detail of the duration of the hold and other developments as they become available.”
Ever since the non-compliance news arrived, CannTrust’s valuation has taken a beating on the Toronto Stock Exchange.
At the close of last Friday (July 5), the firm’s TSX market cap was sitting at C$912.05m. By the end of the day the news arrived, Monday (July 8), that figure had fallen to C$705.92.
At the time of writing, following the announcement of the company-wide sales freeze, that market cap has tumbled again, down to C$506.62m – a fall of 44%, or C$406m, versus where the firm’s market cap sat at the close of Friday.
CannTrust investors will remember fondly their stock’s peak, when it market cap was worth C$1.55bn, as recently as October 15, 2018.
With a current market cap of $508m, that valuation has fallen by over $1bn from its high point.
In a statement on Monday (July 8), CannTrust said: “Growing in unlicensed rooms took place from October 2018 to March 2019 during which time CannTrust had pending applications for these rooms with Health Canada.
“These rooms were constructed in accordance with regulations and Good Production Practices, and licenses were issued for each of the five rooms in April 2019. There are 12 rooms in total at the facility.”
CannTrust’s operations at its Pelham and Vaughan facilities remain fully licensed.Cannabis Business Worldwide