CannTrust Lands in Hot Water Again


Nov. 27 2019, Updated 4:18 p.m. ET

The Canadian cannabis company CannTrust (CTST) announced that the Toronto Stock Exchange is reviewing the company’s listing. The review took place due to CannTrust not filing its financial statements for the year ending December 31, 2018.

As a publicly listed company, CannTrust has the obligation to file its financial report in a timely manner. So why did CannTrust falter here?

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CannTrust’s Health Canada issues

Earlier this year, the company reported that Health Canada found a violation of compliance at the company. CannTrust was growing cannabis in unlicensed rooms. As a result, CannTrust would destroy $12 million worth of plants and another $65 million worth of inventory. However, this decision would call for a company restatement of financial statements and its position on most updated biological assets.

CannTrust remediation plans

The company has been trying to get back in compliance with Health Canada. It appointed a special committee, which concluded its investigation on the compliance issue.

As a result, the special committee has submitted a detailed remediation plan to Health Canada. The remediation plan includes the action the company will take to come back in compliance for its licenses.

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The deadline

The Canadian cannabis company has until March 25, 2020, to submit its financial statements or face the consequences of delisting. CTST will have to file its restated financial statement for the year ended December 31, 2018.

Also, it’s also required to file its quarterly financial statements for 2019 along with the management discussion and analysis. CannTrust stated that it will meet the TSX requirements and file its documents by the deadline.

Impact on cannabis stocks

Cannabis stocks aren’t having a smooth journey so far in November. Poor earnings results have overshadowed any momentum earlier this year. Moreover, some experts believe cannabis stocks have let down the market.

Plus, as a fundamental analyst, I disliked what I saw in the financial statements. For example, Cronos Group’s (CRON) Q3 financials were a bit of a letdown, in my view. Amid all the developments, CTST was trading about 1.8% lower during the day while Cronos Group moved higher by 1.3%.

The overall cannabis industry, represented by the ETFMG Alternative Harvest ETF (MJ), also gained about 1.2% during the day.


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