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CannTrust and HEXO Try to Calm Investors

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  • CannTrust (CTST) and HEXO (HEXO) have tried to calm investors after facing controversy.
  • CTST and HEXO stock movement suggests investors aren’t convinced.
  • The cannabis companies may have to fix more internally to regain investors’ trust.
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CannTrust faces controversy

Yesterday, CannTrust interim CEO Robert Marcovitch discussed a controversy facing the company. CannTrust is in hot water after it was discovered growing cannabis in five unlicenced rooms

In a Financial Post interview, Marcovitch indicated that the board wasn’t aware of the issue until it received a Health Canada order. He added that the company established a special committee as soon as it learned about the non-compliance. CannTrust has made some big leadership changes.

Looking to sell

While trying to navigate this sticky situation, CannTrust is considering selling the company—its production capacity and intellectual property could interest other cannabis players. However, it has stopped selling cannabis products, which could hurt the company’s revenue in future months.

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HEXO developments

In other news, HEXO stock has come under pressure after a short seller reported a possible HEXO scandal, suggesting the company could follow in CannTrust’s footsteps. We also raised concerns following HEXO chief brand officer Adam Miron’s departure. While his departure isn’t necessarily unusual, we think it could be a negative sign for the company. To learn more, read Why HEXO Stock Fell Almost 18% Last Week.

How investors reacted

Unfortunately, despite CTST’s assurances, investors don’t seem convinced. The stock has stayed choppy. Yesterday, CTST stock closed at $2.15, almost 56% lower than before the Health Canada report.

Overall, the cannabis sector has been subdued. The Horizons Marijuana Life Sciences ETF (HMMJ) closed slightly higher yesterday, by 0.37%, whereas Canopy Growth (WEED)(CGC) closed almost 1% lower. August is set to kick off with Aphria (APHA) reporting its earnings tomorrow. For more on that, see What Analysts Expect for Aphria’s Earnings.

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