CannTrust stock is continuing to sink on Friday after CannTrust Holdings (TSX:TRST) (NYSE:CTST) released its bi-weekly update as mandated by the Ontario Securities Commission, with management at the embattled pot producer still subject to a management cease trade order.
CannTrust Scandal and Struggle
CannTrust’s struggles in 2019 have been arguably the number one story in the freshman year of legalization in Canada. In July, the industry was rocked by the news that the company had been growing cannabis in unlicensed rooms, leading to $70 million CAD worth of cannabis product being destroyed and a 50% drop in CannTrust stock. Further investigation revealed that the scandal went right to the top of the former industry leader, with senior management actually instructing employees to engage in the illicit growing.
Class-action suits and the dismissal of CEO Peter Aceto and President Eric Paul followed, but the corrective action was not enough to win over the trust of investors, and CannTrust stock continued to fall lower and lower. Following the controversy, CannTrust Holdings said it would have to restate its financial results for the three and six months ended June 30, 2019, with management also banned from trading shares in the company until those results are released.
Is CannTrust Stock Near the Bottom?
Under its current obligations to Canadian securities laws, CannTrust must also release bi-weekly updates of the ongoings at the company. The latest update released yesterday states that the company is unlikely to restate its earnings before the end of the year. With the pot market gearing up for Cannabis 2.0 as a catalyst for serious growth in the new year, CannTrust stock will remain under pressure going into January as the dark cloud of those earnings continues to linger over the company.
Even if CannTrust Holdings can finally put its struggles behind it, the market is about to be faced with a massive oversupply of product despite still being limited in terms of retail visibility. CannTrust stock still looks as though it could fall further, spelling more bad news ahead for its investors.
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