What Can We Learn From CannTrust? A Lot

The company’s licences for growing and processing cannabis were suspended at the time, but earlier this year, Health Canada reinstated those linked to CannTrust’s Fenwick and Vaughan facilities. And expects to secure over 240 acres of land in total for low-cost outdoor cultivation which it will use for its extraction-based products. Since announcing its illicit grow operations in July, CannTrust has made efforts to recover its illegally grown pot and even destroyed $58 million (that’s U.S.) worth of inventory. Last week’s filing fits with the company’s previously issued timeline to refile this documentation before the end of the first quarter. But the news that CannTrust’s shareholders have been waiting for has finally arrived. Additionally, CannTrust has been unable to file its quarter income statements with the regulators, with its last quarterly filing coming over nine months ago.

Use the report to fix internal weaknesses and to adopt processes that will prevent further problems. Businesses should take away the basic fact that the regulator can make or take your business. A regulatory investigation or formal action is a serious matter. When a regulator finds an issue, companies should act quickly to investigate, understand weaknesses, remediate with vigor, and acknowledge the issue. Funds advanced under the Credit Facility will be used to fund CannTrust’s working capital needs and support the restoration of its operations, so that CannTrust can continue to rebuild stakeholder trust while delivering quality, innovative products to its patients and consumers.

CannTrust remains under Companies’ Creditors Arrangement Act protection as it deals with multiple class action lawsuits and other litigation. VAUGHAN, Ont. — CannTrust Holdings Inc. is staging a comeback more than a year after its licences were suspended for illegally growing thousands of kilograms of dried cannabis in unlicensed rooms. CannTrust Holdings Inc., the troubled Canadian cannabis producer whose former executives have been charged with fraud, is preparing to wind down if it can’t find a way to fix a default by the end of the month. However, the company is now at the mercy of Health Canada, which isn’t exactly on a timeline, and hasn’t been particularly swift at reviewing licensing applications. Given the gravity of CannTrust’s breach of the Cannabis Act and the coverage it received in lieu of breaking the law, it wouldn’t be surprising to see CannTrust receive a verdict from Health Canada within the next couple of months.

Even If You Forget About The Scandal, CannTrust Is Still A Struggling Business

The producer is once again licensed in both medical and recreational markets. The CannTrust case is the largest scandal in the history of Candian cannabis, shaking the confidence in the legal system for many patients and cultivators alike. It’s still unclear how much cannabis from the unlicensed grow rooms was dispensed to Canada’s registered medical patients, the recreational market, or even exported.

Founded in 2013, CannTrust faced class-action lawsuits from investors who said they lost millions of dollars after the company allegedly made misrepresentations about having necessary licences for growing cannabis. “This marks the end of one long journey and the beginning of a new, exciting era for CannTrust. Today we can take our first step forward, focusing our attention on the bright future that lies ahead, with our new partners, Kenzoll,” stated CannTrust CEO Greg Guyatt in 20 popular recovery books a news release. CannTrust retains the remaining 10 per cent of the common shares of CannTrust Equity. Marshall Fields International B.V., a subsidiary of Kenzoll B.V., has invested $11.2 million to acquire a 90 per cent equity interest in CannTrust Equity and provided a $5.5 million secured credit facility. Getting into such products after competitors allows CannTrust to quickly adjust to new demands in the market and learn from mistakes other cannabis companies made, he said.

CannTrust Announces Court Approval for C$22.5 Million Debtor-in-Possession and CCAA Exit Credit Facility Financing

There’s reason to remain skeptical of how well this remediation plan is going, however. Just recently, for example, on October 27th, John Kaden, who is the Chief Investor Officer of Navy Capital, resigned from the CannTrust board. Perhaps Kaden was merely staying on until the Special Committee finished its investigation; still, for a company that is already down two of its former executives, this is not the best time to be having additional board members step aside. As if that weren’t enough, the black market for marijuana is still flourishing in Canada. Due to better supply, more product choices, and in some cases, lower prices, many Canadians have chosen to stick with illicit options.

• The Company has established a blackout on trading by directors, officers and other insiders of the Company, and intends to continue the blackout until the Q2 Filings and any Restated Financials, if required, have been filed.
• Shareholders quickly filed a class-action lawsuit on July 10, 2019 alleging that the company failed to disclose to investors that it was growing cannabis without regulatory approval and that it did not comply with regulatory requirements.
• There’s the possible delisting from the New York Stock Exchange, as well as trust issues, which are arguably the hardest to overcome.
• Getting into such products after competitors allows CannTrust to quickly adjust to new demands in the market and learn from mistakes other cannabis companies made, he said.
• The company has submitted a detailed remediation plan to Health Canada and expects to complete the work described in the plan by the end of the first quarter of 2020.
• After considering the court materials filed by the Proposal Trustee, CTH and any other person, and hearing the submissions of those present at the hearing , the Court may approve the Proposal and other relief sought by CTH.

CannTrust spent the last 18 months going through a comprehensive remediation do not let guilt or shame threaten your recovery program focused on compliance and simplifying the business.

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At the time patients were told that the voluntary sales hold was temporary. But behind the scenes, officials had mounted an investigation that would soon see CannTrust stripped of all licenses. A whistleblower had alerted Health Canada, the agency that oversees the Cannabis Act, to misconduct at a number of the company’s cultivation sites.

It intends to file restated financials for previous periods by the end of this year. You have Canadian cannabis producer CannTrust , which has fallen from $10 to $1 this can alcohol abuse cause premature aging? year. On the other hand, some big-name marijuana stocks like Tilray are also down 90% from their peaks, and even the leaders like Canopy and Aurora are down 70%.

CannTrust might be a bad-news buy, but it could just as easily implode

Given that it last produced $40 million in trailing annual revenues while running with negative operative margins and negative adjusted EBITDA, the business was hardly a great one. Yet the market is still willing to pay several times sales for the business, even with its operations suspended. The quasi-criminal charges were announced in June by the Ontario Securities Commission, roughly three years after CannTrust was found to be growing thousands of kilograms of cannabis in unlicensed rooms.

CNTTQ CannTrust Holdings Inc.Stock Price & Overview

The board must monitor high-risk areas such as financial reporting and regulatory compliance for anomalies or other warning signs. By including independent board members, a company can demonstrate to investors that it values a fresh eye on the company to ensure that it has adequate controls and a culture of compliance. Regulatory approval is needed to stay in business and to continue growing. Losing credibility with a regulator has long term implications for creditors and shareholders. Once a regulator questions your credibility, this provides shareholders with the right to question all of a company’s disclosures. Synr.g is a tastemaker, with a cannabis collection focused on flavourful sensory experiences.

Then again, it took more than two months just for Health Canada to come to the decision to officially suspend CannTrust’s licenses in the first place. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. CannTrust shares were down five cents, or 4.46 per cent, at $1.07 in midday trading on The Toronto Stock Exchange. Troubled cannabis company CannTrust Holdings Inc. says the Toronto Stock Exchange is reviewing the company’s eligibility for continued listing on the exchange. If a regulator opens an inquiry or shuts down your business, hire an independent third party that has the expertise and knowledge to identify how, when and why the incident occurred. An independent director or committee should be in charge of the investigation and the final work product.

We will not release or resell your information to third parties without your permission. Phoena continues to explore strategic options to generate liquidity for its shareholders. The Board’s deliberations are ongoing and progressing but there can be no assurance that Phoena will ultimately be successful. In these circumstances, CTH believes it is in the best interests of its stakeholders to make a proposal to its creditors under the BIA. He believes consumers will grow to love CannTrust again and that being late to cannabis 2.0 won’t be a downfall. While pot companies saw a surge in sales in the early days of the pandemic, executives now say those spikes are dissipating and they’re having to get creative to reach first-time or casual cannabis users.

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Investors should also take into account that CannTrust’s lack of cultivating and sales activity has allowed it to conserve capital at a time when marijuana stocks are facing serious financing concerns. Having not made any grossly overpriced acquisitions like many of its peers, CannTrust’s balance sheet is in decent shape. One consideration to make here is that CannTrust hasn’t exactly lost a lot of ground to its peers.

CannTrust is committed to research and innovation, investing in developing technologies for new products in the medical, recreational, and wellness markets, while contributing to the growing body of evidence-based research regarding the use and efficacy of cannabis. As the company plainly states in its press release, there are no assurances that Health Canada will reinstate its licenses. And, should Health Canada choose to do so, there’s no timeline of when that’ll happen, or what conditions might be attached. But if CannTrust is able to regain its growing and selling licenses at Niagara, this stock might be a bad-news buy.