CannTrust Ousts Two Senior Executives, Rich Breaks Down the News

CannTrust

It’s been a whirlwind couple of weeks for CannTrust Holdings (TSX:TRST) (NYSE:CTST). What started with a hold on 5,200 kgs of cannabis from Health Canada has now seemingly culminated in CEO Peter Aceto and chairman of the board Eric Paul losing their jobs.

As Bloomberg reports, Aceto was rather dramatically terminated, while Paul’s resignation was “demanded” from others in the company.

“Something had to be done, an example had to be set,” explains Rich. “I don’t think this is really a surprise. I’m surprised it took them this long. But I guess it’s better late than never.”

In a release, Robert Marcovitch—leader of the CannTrust board of directors’ special committee that’s investigating the company’s recent scandal—addressed CannTrust’s future.

“Our first priority is to complete the remaining items of our investigation and bring the Company’s operations into full regulatory compliance,” he said. “Implementing the necessary changes is essential to the interests of our medical patients, customers, shareholders, and employees.”

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A Company (and an Industry) in the Red

On July 8, cannabis cultivators, marketers, consumers, and investors were shocked to hear that CannTrust had been growing cannabis in unlicensed rooms. This illegal cultivation was taking place between October 2018 and March 2019, while the company was still seeking a license for its Niagara Falls facility.

In addition to the 5,200 kgs of cannabis that the regulatory body put on hold, CannTrust elected not to sell a further 7,500 kgs. The total value of this go-nowhere pot is estimated to be around $70 million.

Rich was quick to link CannTrust’s woes to an industry-wide downturn in cannabis stocks. This downturn only worsened with news of class-action lawsuits against the company and plummeting share prices. Right now, CannTrust stock price sits at $2.58 on the TSX, just a titch above the company’s 52-week low of $2.45.

CannTrust tried to save face by reporting to Health Canada about the illicit activity, but try as it might, headlines continued to be negative. Things didn’t improve as the Canadian marijuana index follows the company into its own 52-week low.

Why CannTrust Bid the Executives a (Not So Fond) Farewell

The final humiliation (thus far) arrived when emails revealed that CEO Peter Aceto not only knew about the illicit cultivation, he instructed company officials to “continue as planned” planting seeds in unlicensed rooms.

While Aceto has not directly addressed this news, prior to his termination he spoke to Bloomberg about his role just after the scandal went public.

“The focus is on getting this business back in compliance, getting in the right place with Health Canada so we can continue to drive this business forward,” he said. “That’s what a CEO is supposed to do and that’s what I’m focused on.”

Rich, however, had some choice words for Aceto.

“You couldn’t just continue to be the CEO after everyone knows that you were illegally growing $70 million worth of weed,” he says.

Rich was also quick to add that, “[Firing Aceto] is the start. I don’t think it’s the end, but it’s a start. Hopefully CannTrust can pick up some steam and turn things around.”

What do you think? Is CannTrust’s decision to let go of Aceto and Paul the first step on the road to redemption? Or is the company’s name forever marred by scandal? Like Rich, will you buy into the company if the share price falls below a dollar? Join the conversation in the comments below, we’d love to hear from you.

Featured image: DepositPhotos © focuspocusltd