CannTrust stock is leading the cannabis sector lower on Friday after CannTrust Holdings (TSX:TRST) (NYSE:CTST) said that it will reduce its workforce by 25%, or roughly 140 people.
Key Details
Canadian cannabis company CannTrust Holdings has been in all sorts of trouble ever since it was found that it had cultivated cannabis in five unlicensed rooms at one of its facilities. Health Canada suspended the company’s license, and it has now emerged that the company is going to temporarily lay off around 25% of its employees in order to save on costs.
According to the estimate, the company is going to be able to save $400,000 CAD per month by virtue of these layoffs. However, the layoffs are going to last for 35 weeks only, and if CannTrust fails to hire the employees back, then it might have to pay up to as much as $800,000 CAD.
It goes without saying that the company is in turmoil right now, and since it is effectively out of business, it is perhaps a prudent choice to cut down the workforce temporarily.
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CannTrust stock is down 10% at $1.56 on the TSX.
However, this particular move might also mean that CannTrust Holdings is perhaps quietly confident that it will be able to get back its coveted license within 35 weeks and manage to get back in business. To that end, the company made a highly important announcement back on October 15.
Attempt to Regain Licenses
The company announced a radical move that it hopes will help to reattain its licenses. CannTrust announced that it was going to destroy as much as $65 million worth of cannabis inventory and an additional $12 million worth of biological assets.
The company hopes that this move will make it clear to Health Canada that CannTrust can be trusted as a responsible company in the cannabis industry again.
In September, the company was suspended from both producing and selling cannabis altogether, which is why such a move from CannTrust is not a surprise. The market welcomed this move from the company, and on the day this was announced, CannTrust stock rose by as much as 30% at one point.
What do you think about CannTrust's plan?
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