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Cannabis Company Fires CEO Over Illegal Grow Room Scandal, Stock Up

Cannabis Company Fires CEO Over Illegal Grow Room Scandal, Stock Up


Cannabis Company Fires CEO Over Illegal Grow Room Scandal, Stock Up

The stock rose 23% after dropping 50 % over the last year.

A large cannabis producer in Canada is currently under investigation for allegedly growing weed in unlicensed grow rooms. With the investigation ongoing, the company has now started making changes.

Most recently, the company fired its CEO. Similarly, the Chair of the company’s Board of Directors also resigned. Interestingly, the immediate news of these changes spurred a quick uptick in the company’s stock value.

CannTrust Responds to Ongoing Investigations

Earlier this month, Canadian cannabis company CannTrust Holdings was found to be non-compliant with Canada’s cannabis laws. According to a report from Markets Insider, CannTrust was allegedly growing weed in unlicensed greenhouses. The grow rooms were reportedly built behind fake walls.

On July 8, Canada Health sent CannTrust a formal notification telling the company that it was non-compliant.

According to officials from Canada Health, CannTrust grew marijuana in unlicensed grow rooms from October 2018 to March 2019. During that time, CannTrust had pending license applications for those rooms. But by beginning to grow before all licenses had been approved and finalized, the company fell into non-compliance. Now, authorities are investigating the case further.

As a result of the investigation, Canada Health put a hold on 5,200 kilograms of cannabis. Additionally, CannTrust placed a voluntary hold on another 7,400 kilograms of product.

Now, as the investigation continues to unfold, CannTrust has announced changes to company leadership.

Specifically, the company’s CEO was fired. Additionally, the Board of Directors requested the company’s Chair to step down. He complied with the request.

Now, Robert Marcovitch has been named interim CEO. Prior to this position, Marcovitch was President and CEO of winter sporting goods company K2 Sports. He was also involved with CannTrust as the company’s Special Committee Chair.

“Our first priority is to complete the remaining items of our investigation and bring the Company’s operations into full regulatory compliance,” Marcovitch said in a new press release. “Implementing the necessary changes is essential to the interests of our medical patients, customers, shareholders, and employees.”

He added: “CannTrust has a number of strengths is can draw upon to reset and rebuild, including industry-leading research, innovation, and intellectual property.”

Immediate Impacts of the Investigation

According to CannTrust, the ongoing investigation—and especially placing on hold so much product—could lead to shortages on the retail end.

This could be particularly troubling to Canadian consumers, especially since the country has already dealt with numerous shortages since national legalization went into effect. Immediately after weed became legal, retailers across the country saw massive demand. So much, in fact, that suppliers could not keep up.

It got so bad that earlier this year, some experts predicted that parts of the country could see shortages for up to five years.

Beyond impacting the supply of product, the investigation into CannTrust is also affecting the company’s stock.

Specifically, and somewhat interestingly, news of the company’s leadership changes spurred a quick spike in stock prices.

As reported by Markets Insider, CannTrust shares are down almost 50 percent over the year. But in the immediate wake of announcing the leadership shakeup, stock prices quickly saw a 23 percent spike.

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