August 15, 2019 / 11:54 PM / a month ago

Pot producer CannTrust says over half of its stock frozen following rule violation

(This Aug. 15 story corrects currency in fourth paragraph to C$ from US$)

(Reuters) - Canadian pot grower CannTrust Holdings (TRST.TO) on Thursday said that the sale of over half of its stock of marijuana and around a quarter of its plants had been suspended following the discovery of unlicensed cultivation at its facilities.

Regulator Health Canada last month found unlicensed cultivation in five rooms at a CannTrust facility.

Health Canada placed a hold on about 5,200 kilograms (11,500 pounds) of dried cannabis harvested in the rooms, while CannTrust also put a voluntary hold on a further 7,500 kg of cannabis equivalents.

CannTrust on Thursday confirmed its earlier forecast that the value of the impacted inventory and assets was around C$51 million.

It warned that if Health Canada ordered the destruction of affected product, its second-quarter results would be materially impacted.

Since the news broke in July, the company has fired its chief executive officer, disclosed a regulatory investigation, and said its results may have to be restated, sending its shares plummeting over 50%. Earlier this week, Health Canada also found issues at another of its facilities.

The company said on Thursday that it had been preparing a remediation plan for Health Canada to consider but so far had no “substantive discussions” with the regulator.

Ontario-based CannTrust also said that the New York Stock Exchange was monitoring the company’s late filing of its second quarter financials.

For now, its shares (CTST.N) continue to trade on the NYSE but the stock exchange could begin delisting procedures at any time if it chose, CannTrust said.

Reporting by Shariq Khan in Bengaluru, Editing by Rosalba O'Brien

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