CannTrust Stock Hits All-Time Low: Has It Bottomed Out?

CannTrust stock

CannTrust stock is hovering above an all-time low this week, but has CannTrust Holdings (TSX:TRST) (NYSE:CTST) finally hit the bottom?

The Troubles for CannTrust Stock

CannTrust Holdings has been the most troubled and troublesome of all Canada's pot stocks in the freshman year of legalization. Once singled out as a potential industry leader, CannTrust has been embroiled in scandal upon scandal, grappled with supply and storefront issues, and its seen several senior executives dismissed or walk out in the last 12 months. In July, the industry was rocked by news that the company had been growing cannabis in unlicensed rooms, leading to $70 million CAD of product being placed on hold and a 50% drop in CannTrust stock.

That was just the tip of the iceberg for CannTrust Holdings, as the situation descended into farce in the ensuing weeks and months. Class-action lawsuits, Health Canada tribunals, and news that senior executives at the company not only knew about the illicit cultivation but insisted on it, led to an implosion in CannTrust shares. In the company's defense, it has taken measures to rectify the situation by ousting former CEO Peter Aceto and President Eric Paul.

Yet CannTrust's woes continue, and show no signs of abating either. Last month, CannTrust stock tanked a further 10% on reports that the company was going to temporarily lay off approximately 140 staff for a period of 35 weeks in order to save $400,000 CAD, with a penalty of $800,000 CAD if it fails to reinstate those staff. Considering CannTrust Holdings has a market cap of $163.77 million, it's a measure of just how far the company has fallen that it is making such drastic choices to save a relatively small sum. Surely things can't get worse from here?

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Is the Bottom in Sight?

CannTrust stock clearly has a long way to go if it aims to get back to the top of the pile, but it looks as though that might just be a bridge too far. Even if the company can regain its licenses, the market is about to be faced with a massive oversupply of product.

Since October 2018, the inventory of dried cannabis has more than tripled to nearly 400,000 kilograms, while monthly sales have roughly doubled to 13,000 kilograms a month. Thus, it'd take nearly two and a half years to clear out the existing dried supply if everyone stopped growing new cannabis tomorrow. CannTrust shares are currently trading at just $1.16 in Toronto and don't look to be going anywhere but down.

What do you think?

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