Debra Borchardt
The Ontario Securities Commission approved a request by CannTrust Holdings Inc. (NYSE: CTST) for a management cease trade order (“MCTO”) under National Policy 12-203 – Management Cease Trade Orders. Such a request means that the Chief Executive Officer, Chief Financial Officer and members of the board of directors or other persons who had or may have access to material information that has not been publicly disclosed can not trade shares of the company. CannTrust said that it does not affect the ability of investors who are not insiders to trade.
In addition to that, CannTrust said it will probably miss its filing deadline of August 14, 2019, to file an interim financial report for the three and six month periods ending June 30, 2019. CannTrust is now in a holding pattern waiting on decisions from Health Canada as a result of the company’s facilities not complying with the regulations as stated by law. “Health Canada has advised the Company that it is unable to provide any guidance about the timing or content of its decisions concerning the Company.”
Health Canada could order total destruction of the seized inventory, but so far hasn’t indicated if it will do so. CannTrust also said that has not had any discussions with Health Canada with regards fixing the situation it finds itself in.
NYSE
CannTrust is currently listed on the New York Stock Exchange and said it has kept the exchange up to date on its interactions with Health Canada. The company said in its statement that “The NYSE advised the Company that as a consequence of the Company’s announcements concerning its audited financial statements for the year ended December 31, 2018 and its unaudited financial statements for the quarter ended March 31, 2019, the Company is viewed as no longer having a complete annual report on Form 40-F on file for the year ended December 31, 2018.”
For now, CannTrust shares will continue to trade on both the Toronto Securities Exchange and the NYSE. “However, the NYSE advised the Company that (a) it will closely monitor the status of the Company’s late filing and any related public disclosures for up to six months from its due date, and (b) if the Company fails to file its annual report and any subsequent reports within six months of their filing due dates, the NYSE will determine, in its sole discretion, whether to halt trading in the Company’s securities or whether to allow the Company’s securities to trade for up to an additional six months, depending upon the circumstances.” The NYSE also noted that it could begin delisting the company shares at any time if the circumstances warranted it.
Financial Impact
At the beginning of the scandal, CannTrust repeatedly stated that it expected to take some sort of financial hit, but couldn’t determine what that would be. At this time, CannTrust says the estimated value of the inventory affected by the Health Canada decisions is roughly $51 million. This accounts for 53% of the total company inventory and about 30% of the total biological assets. CannTrust still has approximately $250 million in cash and cash equivalents.
