Business

CannTrust shares plunge again as Health Canada deems 2nd cannabis facility 'non-compliant'

Shares in Canadian cannabis company CannTrust lost about a quarter of their value on the stock market Monday after the company said Health Canada has deemed a second one of its facilities "non-compliant with certain regulations."

Problems mount at cannabis company as government cracks down after unlicensed growing

A worker trims cannabis plants at CannTrust facility in Ontario's Niagara Region. The company said Health Canada has deemed a second one of its facilities 'non-compliant with certain regulations.' (Tijana Martin/The Canadian Press)

Shares in Canadian cannabis company CannTrust lost about a quarter of their value on the stock market Monday after the company said Health Canada has deemed a second one of its facilities "non-compliant with certain regulations."

The Vaughan, Ont.-based company's problems began about a month ago after government health authorities discovered it had been producing cannabis plants in unlicensed greenhouses.

Health Canada halted the sale of products from the company's facility in Pelham, Ont., near Niagara Falls, last month after it was revealed that the company was growing cannabis in five greenhouses within the 12-greenhouse facility that didn't have a licence to operate at the time.

Now a second facility, in Vaughan, north of Toronto, has also been found in violation of regulations.

A news release from the company said Health Canada flagged the company for, among other things, inadequate security protocols, failing to retain documents, inadequate quality assurance and improper cannabis storage procedures. 

Those revelations came about following an inspection by officials from Health Canada of the Vaughan facility in early July.

CannTrust has already fired its CEO and board chair as a result of the first illegal growing scandal.

"We have retained independent consultants who have already started addressing some of the deficiencies noted in Health Canada's report," CannTrust interim CEO Robert Marcovitch said in a statement.

"We are looking at the root causes of these issues and will take whatever remedial steps are necessary to bring the company into full regulatory compliance as quickly as possible."

Around the time that recreational use of cannabis became legal last fall, CannTrust shares were worth more than $15 apiece on the Toronto Stock Exchange. But that was before a slow decline in the company's value, culminating in a the recent sell-off. CannTrust's TSX-listed shares lost about a quarter of their value in trading on Monday, going as low as $2.45 a share before recovering to close at $3.04, down $1.17 or more than 27 per cent on the day.

That's the investor reaction to the possible worst-case scenario of the probe's outcome: Health Canada revoking the company's licence to cultivate, effectively putting the company out of business or forcing them to be taken over at their current deeply-discounted level.

In additional to recreational sales, the company has more than 72,000 medical cannabis users, and the company says it is working with them to ensure they have access to the drugs they need.

"The health and well-being of our patients remains a priority," a company spokesperson told CBC News. "We have ensured through regular communication that patients are aware of their options to secure the medicine they need.… We look forward to welcoming back patients as soon as possible."

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