Things just never seem to get better for CannTrust Holdings Inc. (TSX:TRST) (NYSE:CTST). The most dramatic downfall in the cannabis space just keeps delivering gut punches, as today the company announced that it received late a notice of licence suspension from Health Canada.
According to the notice, CannTrust can no longer produce or sell cannabis. While the company can finish cultivating and harvesting its current crops, until the suspension is lifted, it cannot “propagate new lots or batches of cannabis or engage in the sale or distribution of cannabis.”
“People are going to be panic selling,” says Rich. “But what do you expect when you’re doing what CannTrust did?”
Breaking Down the Latest CannTrust News
While Health Canada’s decision means that CannTrust won’t be able to make or profit from cannabis—which eliminates its entire revenue stream and operating purpose—Rich explains that the news isn’t as bad as it could be.
“I think this is actually pretty lenient,” says Rich. “It shows me that they have the ability to get the license back, and that’s good news for investors because maybe the stock will go back up. But it’s going to do down first.”
According to the notice, Health Canada will reinstate CannTrust’s license if the reasons for the suspension no longer exist. This means the company must commit to: producing and distributing cannabis only as authorized, improve CannTrust personnel’s knowledge of and compliance with the Cannabis Act, and keep records such as inventory tracking and reports in a better manner.
CannTrust’s Recent Past
For those unfamiliar with the CannTrust situation, Health Canada accused the company of breaking cannabis cultivation regulations back in July. This was because the regulatory body found that it was growing cannabis at its Pelham facility in Ontario in rooms that were not licensed for cannabis cultivation.
A total of 12,500 kgs of CannTrust cannabis—estimated to be worth $70 million—was then put on hold.
In the weeks that followed, a series of class action lawsuits hit the company as it made further reports about its illicit activity to Health Canada. By the end of July, CannTrust ousted two senior executives for their roles in and knowledge of the non-compliant cultivation.
Though outwardly this appeared to be a good way to address the scandal and begin moving on from it, the company had not yet hit rock bottom. Earlier this month it came to light that CannTrust allowed black market cannabis to enter one of its facilities and ultimately work its way into the retail supply.
In an attempt to conceal this fact, employees reportedly altered the names of up to 20 strains. This put the cannabis company in further violation of Health Canada regulations.
TRST Stock Falls Ever Downward
Investors who have chosen to stay with CannTrust through the scandalous season have yet to be rewarded for their loyalty. The company’s stock price has plummeted time and time again, today reaching an all time low.
When news first broke about CannTrust’s misdeeds, the stock fell almost 50%, from $6.46 on July 5 to $3.34 on July 12. Save for a brief spike in mid-August, the stock continued to drift downward, approaching $2.00.
Yesterday’s news brought with it a steep decline for TRST. It opened today at $1.56—88% down from where it was at the start of July—and in a follow-up video Rich says it won’t stop there.
“I don’t see how they keep the stock over a dollar at this point,” says Rich. “It might go as low as $0.50 before we see a bottom. I don’t see how anyone buys this stock until Health Canada reinstates their license.”
He goes on to say that the company should be able to weather the storm for now, as it has considerable money in the bank. CannTrust has also proven its willingness to operate on a lean budget. having laid off 20 percent of its staff in early September.
What do you think? Can CannTrust get its license back, or is the company done? Join the conversation in the comments below.
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