CannTrust Dips After Regulator Finds Illegitimate Growing

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CannTrust Dips After Regulator Finds Illegitimate Growing

CannTrust's stock lost 20 per cent of its value on Monday, and continued its sell-off Tuesday morning - within an hour of morning trading, the stock had already dropped a further six per cent.

"These rooms were constructed in accordance with regulations and good production practices, and licences were issued for each of the five rooms in April 2019", the company said.

The CannTrust Pelham facility has a total of 12 growing rooms.

In addition to the 5,200 kilograms of cannabis placed on hold by Health Canada, the company is voluntarily holding an additional 7,500 kilograms of dried cannabis equivalent for Health Canada inspection, and could face a potential recall of shipped products that were grown in unlicensed rooms.

"We made errors in judgment", Chief Executive Officer Peter Aceto said.

The stock for the company declined over 20 percent in value after the opening bell both in NY and Toronto.

Improving the Quality and Compliance function at the Company has been a priority for senior leadership.

"It is unclear what they were missing or what information was inaccurate, but if they wanted to add additional cultivation rooms to the site license, they should have submitted an amendment for approval before beginning a grow cycle". While the company's name says trust, it seems Health Canada couldn't trust the company to wait until the grow rooms were licensed before beginning work.

"It's taken a huge negative on all of the Canadian-licensed producers".

The marijuana producer confirmed that one person was sacked at its Niagara facility related to the unregulated growing.

That being said, CannTrust has stated that with so much of its cannabis supply being held up right now (12,700 kilos to be precise), it will be hard to get any product to vendors. When considering these forward-looking information and statements, readers should keep in mind the risk factors and other cautionary statements in CannTrust's Annual Information Form dated March 28, 2019 (the "AIF") and filed with the applicable Canadian securities regulatory authorities on SEDAR at www.sedar.com and filed as an exhibit CannTrust's Form 40-F annual report under the United States Securities Exchange Act of 1934, as amended, with the United States Securities and Exchange Commission on EDGAR at www.sec.gov.

According to Aceto, Health Canada inspectors made a surprise visit to the Niagara facility in June and issued a report on the company's non-compliance on July 3.

At the time of this writing, the company had an average analyst price target of US$7 in NY and C$12.50 in Toronto, according to TipRanks. We have made many changes to make this right with Health Canada. The Company has also purchased 81 acres of land in British Columbia and expects to secure over 240 acres of land in total for low-priced outdoor cultivation which it will use for its extraction-based products.

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