CannTrust (TRST.TO) Stock Drops After Failed Health Inspection

WRITTEN BY Dan Kent | UPDATED ON: August 2, 2019

CannTrust TSX:TRST, is it game over?

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Product Grown in Rooms Not Yet Licensed

Well known Canadian stock and pot producer CannTrust (TSX:TRST) saw a sharp decline in their share price following news that some of their product grown in unlicensed rooms had been shipped out of their Niagara facility.

Beginner investors looking to learn how to buy stocks in Canada have often gravitated towards Canadian cannabis stocks due to their high return potential. And those who chose Canntrust might be in hot water.

Health inspectors showed up unannounced at the Niagara facility in June and have requested a formal response from CannTrust by mid-July on how exactly the unlicensed production took place.

Thousands of Kilograms of Marijuana On Hold

Health Canada ordered a freeze on approximately 5200 kg of product that was grown in 5 unlicensed rooms.

CannTrust also voluntarily put a hold on another 7500 kg of product at its Vaughan Ontario facility that was grown in “previously unlicensed rooms.”

The company also placed a voluntary hold on an additional 7,500 kilograms of dried cannabis equivalent at its Vaughan, Ont. indoor facility grown in “previously unlicensed rooms.”

“Look, mistakes were absolutely made at CannTrust…”

-CannTrust CEO Peter Aceto

CannTrust stated that a root-cause analysis will be conducted with the assistance of a third party firm in order to determine exactly who was responsible for allowing the marijuana to be produced in the rooms that had not yet been licensed.

“Look, mistakes were absolutely made at CannTrust. We have got a very clear process in place that is going to get us back into compliance as soon as possible. We have a history of growing quality products that people like, and we have typically done it in a safe, quality way.” CannTrust CEO Peter Aceto has said.

Market Reaction, Shortages Possible

CannTrust’s share price fell roughly 20% after the incident surfaced. The company warns of supply shortages, but the precise financial impact of the event is still unknown.

“To learn of the non-compliance status was disappointing and surprising. Getting to understand what happened here is a priority. We are making sure we are going to be open throughout this process, and will share any data with Health Canada,” CEO Peter Aceto said.

Peter Aceto also affirmed that the company is working “collaboratively and openly” with Health Canada on the issue. Should you be buying CannTrust right now? We’d caution not to get caught catching a falling knife.