CannTrust crackdown sinks Cannabis stocks

Published on: 10 Jul, 2019

A leading licensed provider of medical cannabis is in hot water after regulators found cannabis grown in unlicensed rooms. CannTrust (NYSE: CTST), a Canadian cannabis producing company, has dropped over 20% in share value on Monday as regulators put a hold on over 5,000 kg of cannabis. In addition, the Company voluntarily put another 7,500 kg of its cannabis inventory on hold until all of the inventory is compliant with regulations.

To put to perspective, CannTrust has sold over 3,000 kg of dried cannabis in Q1. The amount put on hold is a large part of the Canadian cannabis inventory.

Following CannTrust’s drop in share price, all other major cannabis stocks have been dragged down too. Major companies like Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB) has dropped over 1%.

In a press release, CannTrust said that “Health Canada is conducting quality checks of product samples on hold at Pelham, with results expected in 10 to 12 business days. Due to the product on hold, some CannTrust customers and patients will experience temporary product shortage. The Company is exploring options to mitigate these shortages.”

In hindsight, the Company has said that it is going to implement the following corrective actions:

  • Further comprehensive employee training
  • Retained external advisors for an independent review of compliance processes
  • Comprehensive review and update of processes and procedures
  • Voluntarily advised Health Canada of issues that may impact compliance at its Vaughan facility regarding product storage.

“At this time, the impact of these matters on CannTrust's financial results are unknown until Health Canada completes its quality testing of product from Pelham which is currently on hold. Further updates will be provided as they become available.”

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