Cannabis producer faces Health Canada problems, warns of product shortages

Cannabis stocks down

CannTrust slumps after Health Canada finds unlicensed pot cultivation

The regulator put a hold on 5,200 kilograms of dried cannabis that was harvested from the unlicensed rooms in Pelham, Ont. CannTrust placed a voluntary hold on another 7,500 kilograms of product harvested in Vaughan, Ont.

CannTrust's Toronto-listed shares were down about 21% at C$5.11 after touching a session low of C$5.03.

The company says that the holds may result in temporary product shortages for some customers, adding that it does not know, at this point, if the situation will affect financial results. While the company's name says trust, it seems Health Canada couldn't trust the company to wait until the grow rooms were licensed before beginning work.

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The regulator found that cannabis had been grown in five unlicensed rooms between October and March of this year during which time CannTrust was applying for licences and that inaccurate information was provided to the regulator by CannTrust employees.

CannTrust stock is having one of the worst trading days this year as shares of CannTrust Holdings (TSX:TRST) (NYSE:CTST) slipped below the $4 mark after Health Canada found that the company was in violation of a set of regulations.

"As a result, we believe there is meaningful risk to revenue growth over the coming months".

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The company has also hired Andrea Kirk, for the newly created role of Vice President, Quality.

"Ultimately this will tarnish the relationship between CannTrust and Health Canada".

Health Canada is conducting quality checks on those products, the company said, with results expected within the next two weeks. "We made errors in judgement, but the lessons we have learned here will serve us well moving forward", said CEO Peter Aceto.

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Ontario-based CannTrust said it accepted Health Canada's findings, adding it had taken actions to ensure current and future compliance. "For us, this will make institutional investors think twice, and could also likely make it harder for CannTrust to attract high quality" partnerships with consumer-packaged goods companies.

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