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Could It Be the End for This Cannabis Company?

By Eric Volkman – Sep 18, 2019 at 8:16PM

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CannTrust's license is suspended by the Canadian government's marijuana business regulator.

The high-profile and somewhat infamous marijuana stock CannTrust Holdings (CNTTQ) has suffered a severe and possibly fatal blow to its business. The company revealed in a press release that it received notice that its license to produce and sell cannabis products has been suspended.

In the press release, CannTrust said that the move "constitutes a partial suspension of the Company's license for standard cultivation and a full suspension of its licenses for standard processing, medical sales, cannabis drugs and research issued under the Cannabis regulations."

Marijuana bud burning

Image source: Getty Images.

According to CannTrust, during the suspension the company will be allowed only to grow and harvest existing plants, in addition to activities related to same. It is not permitted to grow new plants, or to sell and distribute cannabis at all.

CannTrust added that its license could be reinstated if it can show that the suspension is unwarranted, or if the reasons behind it are no longer applicable.

Health Canada, the government agency responsible for regulating that country's nascent cannabis industry, has not yet issued its own press release on the matter. It did, however, confirm the suspension in a statement emailed to the Financial Post, a Canadian financial newspaper. In the statement, Health Canada said it was seizing and impounding all marijuana products at CannTrust's growth and cultivation facilities.

HealthCanada's is doing so "in order to protect public health and safety," according to the statement.

CannTrust said in its press release that management and the board of directors are "reviewing the Notice with the Company's counsel and other advisors."

"Over the past two months, the Company has moved swiftly to assess and address Health Canada's concerns, including areas of operational non-compliance," CannTrust continued. "The Company remains committed to being in full regulatory compliance."

The first reports of CannTrust's difficulties with the regulator surfaced in July, when the company admitted that it had been growing and selling product in five rooms in its Niagara facility which at the time were not licensed. Since then,  the company's stock has fallen considerably. Just before that news broke in July, the stock traded at over $5 per share. On Wednesday, it closed at $1.27. 

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends CannTrust Holdings Inc. The Motley Fool has a disclosure policy.

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