A surprise visit by health inspectors to one of CannTrust’s (TSX:TRST) facilities resulted in a discovery of multiple deficiencies in the process of growing product that had been finished and shipped to distributors.
Since that initial discovery it has only snowballed into a scathing situation for CannTrust involving the unlicensed production rooms and allegations that the high levels of management had knowledge of the unlicensed growing that had occurred.
Amid the aftermath, the cannabis producing company’s board has determined that their CEO, Peter Aceto, be terminated, and the company’s chair Eric Paul, resign.
So what’s next for the cannabis producer? Can they recover from this by overhauling management?
Work To Be Done
Robert Marcovitch headed up the special committee investigation into the unlicensed rooms, and he will now be taking over the role of interim CEO.
The company is following through with the remainder of the investigation in order to restore full regulatory compliance.
Much is to be done to bring back the trust in the company, if at all possible. Provincial wholesalers removed the company’s products from their inventory and CannTrust ceased all sales to complete the investigation.
Several analysts downgraded the company’s stock and some stopped their coverage altogether.
CannTrust share price saw a sharp decline in early July and does not seem to be letting up as more evidence has come to light. Investors who purchased the popular Canadian stock prior to the news dropping may never see the stock recover to initial purchase prices.
License In Danger
There is a possibility that the company could face losing their license as a producer. Considering this new industry that fought valiantly for legalization and has finally come through, in my opinion the consequences for this scenario should not be dampened in any way.
Government bodies should be using this opportunity to send a message to producers that the safety of cannabis products is not to be meddled with.
It is important that standards be set in the industry’s infancy to ensure the quality of future product from all producers. More often than not the regulated cannabis products come at a premium price compared to other avenues. Being able to trust in the legitimacy of the source is a part of paying that higher dollar for the product.