Shareholders hoping for good news on the continued federal review into CannTrust Holdings Inc (TSX: TRST; NYSE: CTST) are in for a disappointing end of the month.
As of Friday, Aug. 30, the company continues to tread water waiting on a decision from Health Canada regarding the company’s use of unlicensed grow rooms — a major infraction following the legalization of adult recreational cannabis last year.
That upcoming decision could include any number of potential disciplinary actions, up to entirely revoking CannTrust’s license to produce and sell cannabis. If that most severe option is implemented, it would effectively end the company’s ability to operate in the cannabis industry.
Earlier this month the company issued a cease trader order, preventing company insiders from selling stock while the review continues. Under the terms of the National Policy 12-203 Management Cease Trade Order, management is now obligated to provide updates to shareholders every two weeks.
Unfortunately the first update was much less positive than shareholders were expecting, with CannTrust issuing this brief statement:
Those bi-weekly updates required by the policy noticeably won’t include CannTrust’s recently missed quarterly financial reporting. All further 2019 reports are being held off until a Health Canada decision regarding the unlicensed growing is reached due to the potential far reaching consequences of that action.
Sitting on quarterly reports during this holding pattern may cause additional problems for the company in the short term, as failing to provide financial details could see CannTrust shares yanked from the NYSE entirely in as little as five months.
Aside from stock woes, the company is no longer selling any product while the review is underway, and $2.9 million worth of existing CannTrust product was recently yanked form the Ontario Cannabis Store.
In an effort to smooth over investor relations and show a willingness to rectify problems with Health Canada, the company fired CEO Peter Aceto and installed a special committee to recommend changes to internal policies.
The next bi-weekly update is expected to arrive after close of business on Thursday, Sept. 12.