On Wednesday, CannTrust (CTST) stock fell almost 22.5% after new information came to light. The information came from a report by The Globe and Mail. According to the report, the company’s executives were aware that it didn’t comply with Health Canada’s regulations. The report stated that Peter Aceto and Eric Paul, CannTrust’s CEO and chairman, knew about the compliance issues several months ago.
Why did CannTrust stock fall?
CannTrust grew cannabis in unlicensed rooms. The violation came to light after one of CannTrust’s employees reported the issue to Health Canada. As a result of the findings, Health Canada suspended 5,200 kilograms of CannTrust’s product sales. CannTrust volunteered to put a hold on the sale of an additional 2,300 kilograms, which brought the total to 7,500 kilograms.
Corporate governance is a big issue with cannabis companies. Read CannTrust and a Big Problem Nobody’s Talking About to learn more. We discussed that it isn’t best practice for a former employee to be on a company’s board. Paul, CannTrust’s current board chairman, founded the company. In the past, he served as the company’s CEO.
Weak corporate governance has been our biggest complaint about the cannabis sector. Aphria (APHA) struggled with its acquisition in Latin America. As a result, the company’s CEO left. Overall, investors lose the most.
In CannTrust Stock Might Fall Below $1, we discussed why the company is in a dangerous position. According to a report, there were speculations that the company might lose its license. As a result, the company’s value would fall if it lost its license.
How did other stocks react?
We weren’t surprised that the cannabis sector traded in the red on Wednesday. The Horizons Marijuana Life Sciences ETF fell almost 1.4%. HEXO fell 2.9%, while Canopy Growth fell 0.71%.