The wild ride for CannTrust Holdings Inc. shareholders continued Monday morning after the company’s stock plunged on news that its manufacturing facility in Vaughan, Ont., has been rated non-compliant by Health Canada.
The company says it was notified by Health Canada on Friday and added that remedial actions were underway.
CannTrust shares fell $1.04, or 24.7%, to $3.17 on the Toronto Stock Exchange in mid-morning trading. The swing marks a second consecutive volatile trading session, as shares initially fell Friday morning, only to roar back late in the day to close more than 40% higher.
The decision by the regulator was based on an inspection in July following revelations that Health Canada had found the company’s greenhouse in Pelham, Ont., to be non-compliant. The scandal has led to the ousting of the company’s chief executive and the chairman of its board of directors.
The company had already implemented a voluntary hold on the sale and shipment of all cannabis products while Health Canada reviewed its Vaughan manufacturing facility.
It says it continues to work with Health Canada and will provide further details of the hold and other developments as they become available.
“We have retained independent consultants who have already started addressing some of the deficiencies noted in Health Canada’s report,” CannTrust interim CEO Robert Marcovitch said in a statement.
“We are looking at the root causes of these issues and will take whatever remedial steps are necessary to bring the company into full regulatory compliance as quickly as possible.”
CannTrust shares fell Friday after the company announced that accounting firm KPMG LLP had withdrawn its Mar. 27 report on 2018 financial results and an interim report for the three months ended Mar. 31, 2019, and declared that the audited results can’t be relied upon as accurate, the cannabis grower said Friday in statement from Vaughan, Ont.
CannTrust said Friday that the auditor’s decision to revoke its reports was prompted by the company’s caution against relying on financial statements for those time frames, as well as the recent sharing with KPMG “of newly uncovered information from the special committee’s investigation, including information that led to senior leadership changes.”
CannTrust added that KPMG was not aware of the information recently shared by the company when the auditor issued its reports, and that it had relied upon representations made by individuals no longer at the company.
The Ontario Securities Commission said earlier in the month it had launched a joint investigation with the RCMP to examine unlicensed growing at CannTrust’s greenhouse.
The company has warned that it would likely miss its filing deadline for an interim financial report because of the significant uncertainty on the impact of the pending Health Canada decisions.
Health Canada’s probe could result in the suspension or termination of CannTrust’s cannabis licences and fines up to $1 million.