Shares of CannTrust Holdings Inc (TSX:TRST) (NYSE:CTST) are trading down today, the fourth day of consecutive drops that began when the Canadian marijuana-grower publicly revealed it had been slapped with a non-compliance notice from Health Canada for growing plants in unlicensed rooms at it greenhouse facility in Pelham, Ont.
Shares were down to C$3.97 (US$2.92) at 12:30 p.m., down 38.5% since last week, and down just under 42% in the last 12 months.
The non-compliance order was the first in a cascading series of developments that has battered the company’s stock. On Monday, CannTrust acknowledged a report by Health Canada, which regulates legalized cannabis, that found the company had been growing cannabis in five unlicensed rooms in one of its greenhouse facilities between October 2018 and March 2019. This timeframe covered the period when the grower had pending applications for permits to use the space for growing operations. Licences for these rooms were finally granted in April.
On Wednesday, CannTrust’s recreational cannabis products were pulled from shops in Ontario, Canada’s largest pot market. The move was the result of Health Canada putting a temporary hold on 5,000 kilograms of dried cannabis pending its investigation. The producer then voluntarily put an additional 7,500 kilograms of dried cannabis on hold from another growing facility in Vaughan, Ont.
Earlier today, the Alberta Gaming and Liquor Commission, which regulates retailing of marijuana in the western province, placed CannTrust products on hold. In addition, the company’s medical pot products linked to the unlicensed growing space in Ontario were quarantined in Denmark.
Also today, in an exclusive interview with a former employee, The Globe and Mail reported CannTrust used fake walls to hide thousands of cannabis plants to stage what it called “misleading photographs” that were sent to Health Canada.
Analysts reacting to the news have slashed their target price for CannTrust stock. The Royal Bank of Canada downgraded its target price to $5 from $13 due to the Health Canada probe, while the Bank of Montreal reportedly adjusted its target price to $6 from $11.