Brodsky & Smith, LLC today announced that it's investigating various class-action lawsuits against several companies, with one being CannTrust Holdings (TSX:TRST) (NYSE:CTST). On the news, CTST stock dropped nearly 5% in morning trade.
Here's what we know.
CTST Stock Falls on Class-Action Suit News
In a news release, Brodsky & Smith, LLC, which is a Bala Cynwyd-based company, said that, according to the complaint, the defendants failed to inform investors of different things, starting with how CannTrust was growing cannabis in its greenhouse in Pelham when applications for regulatory approval were still pending. The defendants also failed to tell investors that the Pelham greenhouse didn't comply with specific regulations; because of this, Health Canada was likely to slap CannTrust Holdings with an inventory hold. The hold would have lasted until the Pelham greenhouse matched the applicable regulations.
There's more, too. Because the Pelham facility didn't meet regulations, customers of the cannabis company would face product shortages, making them seek product elsewhere.
In addition to CannTrust Holdings, Brodsky & Smith, LLC is also looking into class-action suits against L Brands, Inc. (NYSE:LB), and Karyopharm Therapeutics, Inc. (NASDAQ:KPTI).
>> Liberty Stock Rises Following $14 Million USD Asset Sale
The news, and the tumble of CTST stock, comes a couple of days after CannTrust stock dropped around 5% on August 19 after announcing that the government of Ontario's cannabis retailer has returned all of its CannTrust products.
According to Yahoo Finance, as of 10:26 PM EDT, CTST stock is trading at $1.88; this puts CTST stock down 4.08%.
Takeaway
It has been a tough few months for CannTrust Holdings. The market has known for a while about the company cultivating cannabis in unlicensed rooms at its Pelham facility; but since the news first emerged, the company has been trying to gain back public trust. But today's announcement in combination with the Ontario retailer returning all of the company's products is likely a blow to the company's hopes of fixing its reputation.
What do you think about the scandal? Let us know your thoughts in the comments below.
Featured image: DepositPhotos © gunnar3000
