The other shoe has finally begun to drop for CannTrust Holdings Inc (TSX: TRST; NYSE: CTST) while awaiting a Health Canada disciplinary decision after the company was discovered to have been growing cannabis in unlicensed rooms.
Following that revelation, the company halted all sales and grow operations, and then subsequently had all unsold product returned by the Ontario Cannabis Store.
With no revenue incoming and no new product going out, CannTrust has trimmed its employee roster by 20%, letting go of 180 workers in the customer service and cultivation departments.
Discussing CannTrust’s moves to return to compliance and the projected $9 million a year savings by letting go of nearly 200 employees, Interim CEO Robert Marcovitch commented:
Marcovitch stepped into the position of Interim Chief Executive Officer after former CEO Peter Aceto was fired for his role in the unlicensed grow scandal.
In addition to sacking Aceto and demanding the resignation of board chairman Eric Paul, CannTrust formed a special committee to investigate the unlicensed grow scheme and recommend further changes to bring company operations into compliance with federal law.
Health Canada’s regulator has not yet completed a review of the unlicensed growing, which took place in five hidden rooms at a Pelham-based greenhouse from October of 2018 through early March of 2019.
The status of the company’s ability to continue functioning remains unknown until Health Canada hands down a final decision. Until that time, CannTrust issued a National Policy 12-203 Management Cease Trade Order, which prevents management from selling shares and requires the company to issue bi-weekly updates for shareholders.
Prior to the bombshell news of unlicensed growing, CannTrust stock had already been on a steady decline, consistently dropping from a high of $10.04 back in April. The stock has now bottomed out to a current price of $1.74, and is expected to stay that way unless a favourable decision is rendered by federal authorities.