No one expected the scandal surrounding CannTrust (NYSE: CTST) to stop anytime soon. However, the question at this point is how low can the stock go and whether or not it would become undervalued in the process.
Right now, it seems like we certainly have a lot lower to go as the stock plunged even more on Tuesday as it was hit with a fresh batch of bad news. Another company has returned millions of dollars worth of weed as a fresh round of senior executive departures rocks the company even further.
On the first topic, CannTrust said today that it received notice from an Ontario Cannabis Store (OSC) that will be returning around C$2.9 million worth of cannabis. The OSC is a Canadian crown corporation in charge of wholesale cannabis distribution to licensed retailers in the province and also operates the provinces biggest online cannabis store.
Specifically, the OSC said that CannTrust was “non-conforming” to the master agreement between the two companies. While there weren’t any more details about what this exactly means, it’s likely that either this comes down to the fact that CannTrust is now under investigation by Health Canada or that the quality of the pot was very low.
On the second issue, at least three senior employees at CannTrust ended up departing from their positions on Tuesday. Sources familiar with the matter said that the company’s master grower Brady Green, vice president of quality operations Andrea Kirk, and operations manager Cameron Fletcher all are no longer with CannTrust.
They join other officials like CannTrust’s former CEO and Chairman, both individuals who were masterminding the illegal grow operation underneath the nose of Health Canada, in having left the company.
“These appointments are part of a broader organizational transformation, which has included a number of departures and the reassignment of roles and responsibilities,” said spokesperson Jane Shapiro in response to the departures.
Shares of CannTrust fell by as much as 5 percent today in response to all of this news. So far, the stock has lost just over eighty percent of its market cap from its peak high in April, although to be fair, the stock had fallen by 40 percent even before this announcement came to light.
At this point, the question that investors need to be asking isn’t whether the stock will stop falling but at what point is the company an okay investment from a value perspective. Earlier this week, news came out that another cannabis company, Sundial Growers, also had seen returns of product.
As such, some investors have been quick to speculate that CannTrust might also be having a problem with low-quality product, although that’s just speculation at this point. What does seem to be true, however, is that at the moment, the best the company can hope for at this point is a discounted buyout offer to take the company private.
CannTrust Company Profile
CannTrust Holdings Inc is engaged in the business of producing and distributing medical cannabis in Canada. Its facility is located at Vaughan, Ontario in Canada. Its brands include LIIV, ESCAPE, SYNR.G and Peak Leaf. – Warrior Trading News
