As much as the Dow Jones Industrial Average DJIA, -0.50% was last down 231 points, while the S&P SPX, -0.80% as down 1%, after President Donald Trump suggested that a trade resolution with China wasn’t imminent, Cannabis stocks are most down on Friday after brewing industry bad news over CannTrust and its future.
CannTrust stocks are down 6% after the company said that auditor KPMG is withdrawing audits for 2018 and the recent March quarter as those number are no longer reliable. The withdrawal of audit reports come after an investigation concluded regarding the company leading to a major internal decision in July. The senior leadership decision refers to Chief Executive Peter Aceto being fired for cause and President Eric Paul being forced to resign.
The issue all reverts back to the company having been discovered to be involved in unlicensed cannabis cultivation. Five unlicensed cultivation rooms the company had been operating since late 2018 has been discovered last week when a whistleblower alerted Canadian Cannabis regulators, which in turn gave the CannTrust’s greenhouse facility in Pelham, Ontario a “non-compliant” rating. Because of the regulators’ rating, the company was forced to stop all sales operations until they can sort out their problem.
“The investigation into the company’s noncompliance with Health Canada regulations and ancillary matters uncovered new information that has resulted in a determination by the board to terminate with cause CannTrust CEO Peter Aceto,” CannTrust said in a statement.
Some sources reveal that CannTrust has been aware of the unregulated and unregistered cultivation of marijuana since November but failed to stop the illegal activity. Some analysts believed that that’s when the CEO and the Chairman should have been kicked out of their positions.
Because of the scandal involving CannTrust, analysts believe that its effect can be felt across the country and throughout the industry.