CannTrust up for sale?
What Does the Future Hold for Canntrust? The Canadian Medical Cannabis Company had been forced to suspend its operations in July, following a Health Canada inspection that uncovered false walls in one of its greenhouses in Ontario. These walls—the existence of which company management had denied—were used to hide plants that were not approved by Health Canada and were therefore illegal. However, internal communications dating back to November 2018 revealed that Peter Aceto, CEO at the time, was fully aware of the presence of the walls in the facilities. He so he was fired last week, along with Eric Paul, a longtime board member.
These revelations about the non-compliance of CannTrust’s facilities have deeply shaken the company, as its stock price immediately plummeted by 50%, and the company’s reputation is now tarnished. It may not be able to recover, as the company’s board has announced to have hired a financial advisor, Greenhill & Co. Canada Ltd., which is tasked with helping them explore their options for the future, including a potential sale of the company.
«Given the potential legal risks, it is unclear whether the strategic review will result in a sale of the company,» said Tamy Chen, an analyst at BMO, in a note on Wednesday. «If Health Canada were to revoke the licenses for all of CannTrust’s facilities, the sale of the company would likely be conducted at a significant discount.».
However, it would be difficult to find a buyer for the company, as it faces the suspension or revocation of its cannabis license as a penalty for violating federal regulations governing cannabis cultivation. Health Canada might be tempted to make an example of CannTrust. Several law firms are also seeking to file class-action lawsuits on behalf of investors.
CannTrust has appointed Robert Marcovitch as interim CEO. «We don’t want to sit idly by, and we want to know the facts,» he said. He will chair a special committee tasked with investigating the company’s non-compliance with Health Canada regulations.
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