CannTrust Stock Prices Tumble as Regulators Find Additional Violations  

Stock prices for CannTrust Holdings Inc. tanked on news that the Canadian cannabis producers were found to have violated cultivation regulations for the second time in less than a month.

Health Canada has notified CannTrust that a growing facility in Vaughan, Ontario was in violation of multiple regulations including:

  • The conversion of five operations rooms into storage areas.
  • Two new areas built without permission from Health Canada.
  • Insufficient security controls.
  • Inadequate quality assurance.
  • Improper document and information storage to allow Health Canada to complete timely audits.

“We have retained independent consultants who have already started addressing some of the deficiencies noted in Health Canada’s report,” interim Chief Executive Officer Robert Marcovitch said in a statement. “We are looking at the root causes of these issues and will take whatever remedial steps are necessary to bring the company into full regulatory compliance as quickly as possible.”

CannTrust’s stock prices have been on a sharp decline for months. In March, shares of the company were trading at $10.04. Today, the price per share slid to $2.22.

CannTrust’s operations had already come to standstill even before reports of the second round of violations surfaced. 

“As previously announced, the company implemented a voluntary hold on the sale and shipment of all cannabis products while Health Canada reviewed its Vaughan, Ontario manufacturing facility,” the company said in a statement. “CannTrust continues to work closely with Health Canada and will provide further details of the hold and other developments as they become available.”

Jesse Pytlak, an analyst at Cormark Securities, a Toronto-based financial firm, did not think the immediate future is looking any better for the cannabis cultivator. 

“A big takeaway from today’s announcement is that the company is now without its manufacturing facility, which will limit its near-term ability to resume sales,” said Pytlak. “Now that you have that facility offline, it creates a bottleneck in the business.” 

The missteps and bad publicity could prove to be too much for CannTrust to overcome. They have hired Greenhill and Co., a firm that facilitates mergers, organizational restructuring, and acquisitions to explore available options including the sale of the company.