CannTrust stock is one of the notable losers in the cannabis sector amid poor quarterly results and shelf offering from CannTrust Holdings (TSX:TRST) (NYSE:CTST).
Let's take a quick look at the company's latest developments.
Poor Earnings Put on Pressure
For the last three months, CannTrust Holdings has not had a particularly great time. The company’s losses in the fourth quarter widened beyond estimates, and in addition to that, CannTrust also projected that its costs will put further pressure on the losses in the foreseeable future.
Last but certainly not least, the company’s shelf offering of shares at $5.50 per share and at a discount of 15% did not go down well with shareholders. CannTrust may have managed to raise $170 million through the shelf offering, but CannTrust stock lost as much as 50% during the last three months.
Acquisition and Production
Despite the recent setback, the fact that the company has managed to raise $170 million is still a silver lining of sorts. The company is going to use this capital to expand its business. CannTrust is considering the acquisition of 200 acres of land for outdoor cultivation, and the cash will also be used to fund the Phase 3 expansion of its Niagara campus.
It is believed that the company will produce 100,000 to 200,000 kilos of cannabis a year from outdoor cultivation and that, in turn, will be used to produce cannabis derivative products. Those products have high margins and will be beneficial to the company’s bottom line in the long run.
Although the company’s market cap stands at $700 USD million, CannTrust Holdings has managed to keep its production costs among the lowest in the industry. If it can scale its production up to 200,000 kilos a year, then the company could stand to make a significant improvement to its balance sheet. The company has projected that it is going to be profitable by the end of 2019, and if it manages to do so, then it would be one of the earliest cannabis companies to achieve that feat.
CannTrust stock is trading higher by 1.205 to $5.05 on the NYSE. CTST stock is up about 3% so far in 2019 and trading just 15% higher from its 52-week low of $4.35.
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