Allegations of underhanded activity by pot producer CannTrust Holdings (CannTrust Holdings News, Stock Quote, Chart TSX:TRST) may have caused investor concern across the cannabis sector but the emergence of compliance issues is a common occurrence for any newly-formed industry.
That’s according to the CEO of a cannabis management company who says that a heavy hand in the CannTrust debacle by Health Canada would be a big blunder for the sector.
CannTrust dropped a bombshell on the pot space last week when it announced that Health Canada was putting part of its inventory on hold as it investigated claims that the company was growing unlicensed cannabis at one of its facilities. The news was followed up by comments from a former CannTrust employee who claimed that CannTrust had put up fake walls in one of its greenhouses to hide the unlicensed plants from inspectors. As a result, CannTrust’s share price has been effectively cut in half and the cannabis sector, already in a funk over the past few months, saw further downward pressure over the past week.
And while it could be months before Health Canada arrives at a decision on penalties to apply in CannTrust’s case, the company has halted all sales of its cannabis, with CEO Peter Aceto saying that his company has hired a third-party firm to conduct an independent investigation into the matter.
Aceto has said, in conversation with BNN Bloomberg on Tuesday, that the company’s focus is “on getting this business back in compliance, getting in the right place with Health Canada so we can continue to drive this business forward. That’s what a CEO is supposed to do and that’s what I’m focused on.”
Allison Kopf, founder and CEO of Artemis, a cannabis cultivation management platform, says that compliance needs to be the first priority for all players in the new industry, as issues such as CannTrust’s can impact the whole sector.
“This is spooking shareholders, at the core of it,” said Kopf, to BNN Bloomberg on Wednesday. “This is hurting the stock value, it’s hurting the company. The future of the company is unknown at this time, whether Health Canada is going to revoke their license and cancel or suspend it.”
Kopf insists that a decision by Health Canada to revoke or suspend CannTrust’s growing license would be “a big misstep for the industry,” and she says that despite cannabis’ blackmarket past, the emergence of compliance issues isn’t anything special.
“It’s just the newness of the industry. We see this in the produce industry all the time,” she said. “With strawberry growers or lettuce growers -whether it’s a head of lettuce where you’re concerned about romaine outbreaks or cannabis getting mould and being released to consumers, those are the same issues.”
“The attention is a lot heavier on cannabis because of the value of the crop and we’re in an industry that has a lot higher margin with a lot of shareholder attention right now, especially in the private space,” she says.