CannTrust announced the company is being investigated both by the Ontario Securities Commission’s Joint Serious Offenses Team, a partnership with the RCMP’s financial crime branch and the Ontario Provincial Police’s anti-racketeering arm. (The Leaf has a helpful summary of l’affaire CannTrust if you’ve missed the last few weeks.)
- CannTrust said it will “likely miss” its August 14 deadline to file Q2 filings and has applied to the OSC for a Management Cease Trade Order pending those filings. The company has frozen trading by directors, officers, and other insiders.
MJBiz - Stocks that had been finally climbing since CEO Peter Aceto’s firing last week began slumping again on news of the investigation.
Bloomberg - Aceto had one of the highest pay packages in Canadian cannabis, and lost as much as $8.2M in options on his termination.
Bloomberg
The same day he received and replied to an email about the company’s unlicensed growing, now-former chair Eric Paul (as well as director Mark Litwin) sold $1M in CannTrust shares, followed by another $5M in shares over the following 30 days.
Globe and Mail
- Earlier this week, interim CEO Robert Marcovitch promised transparency and said, “We are aggressively getting our house in order.”
Globe and Mail - Marcovitch would not say whether other board members knew about the unlicensed growing, noting the findings of the Board’s special committee “are most certainly confidential save for what we clearly want to provide, as we should as a public company.”
- He did not rule out cuts to jobs at CannTrust’s Pelham facility.
Financial Post
CannTrust hired US investment bank Greenhill & Co. to conduct a strategic review that may conclude the company should be sold in whole or in part. It may also recommend strategic investment, business combination, or other changes. The company’s legal liability has not yet been determined, while Health Canada may suspend or cancel CannTrust’s licenses.
Globe and Mail, Bloomberg, MJ Biz Daily
- The CannTrust scandal will likely increase US banks’ physical visits to production locations, at significant costs that will be charged to LPs. Banks won’t be scared off an industry this lucrative, but they will double their efforts to secure their investments.
Bloomberg - Ottawa gossip rag Frank Magazine recalled CannTrust was tightly connected to generic-pharmaceuticals behemoth Apotex, whose founder Barry Sherman was murdered along with his wife Honey in 2017. Sherman and Apotex’s former CEO both owned shares of CannTrust before it went public in March 2018, and CannTrust’s exclusive 2015 partnership with Apotex to develop cannabis pills helped spur investor interest in the company. Frank claimed the CannTrust scandal risked the continued partnership.
Frank, BBC, The Market Is Open
