Canadian Government Cites CannTrust Marijuana Facility For Violating Regulations

Canada Enforces Marijuana Regulations

On August 12, the Canadian marijuana company CannTrust Holdings, Inc. announced that Health Canada inspectors determined that one of its facilities was not in compliance with public safety regulations. The facility is located in Vaughan, a city in the province of Ontario. Health Canada is a department of the Canadian federal government.

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According to a CannTrust press release, the inspectors discovered that the facility managers were not properly storing cannabis or managing important documents, and that the facility lacked adequate security procedures and a quality assurance system. The interim CEO of CannTrust vowed to “take whatever remedial steps are necessary to bring the company into full regulatory compliance as quickly as possible.”

In the wake of the announcement, the value of the company’s shares fell by 26%. The results of the inspection are potentially devastating for CannTrust. The new findings of non-compliance may cause the government to rescind the company’s license to grow marijuana, which would force CannTrust out of business. Whether this happens will largely depend on whether the government accepts a remediation proposal from the company.

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A Pattern of Trouble

Unfortunately for CannTrust, this is not the first of the company’s regulatory woes. Just one month before Health Canada inspectors arrived at the Vaughan facility, they visited a CannTrust facility in Pelham, another town in Ontario. There they discovered that the company had grown over 5,000 kg of marijuana in five rooms that the government had not yet licensed for cannabis production. In response, Health Canada confiscated the entire batch of marijuana and the value of CannTrust shares fell by about 23% in a single day. The company then fired its CEO and voluntarily halted all of its sales until government regulators completed an inspection of the Vaughan facility.

In October last year, the Canadian government enacted the Cannabis Act, which legalized the possession, production, and sale of recreational marijuana throughout the entire country. As a result of the Cannabis Act, there is a growing market in Canada for recreational marijuana, a market which is already worth hundreds of millions of dollars. CannTrust is the fourth-largest recreational marijuana company in Canada. The company also supplies medical marijuana to about 70,000 patients. CannTrust reported 12.6 million Canadian dollars in revenue for the third quarter of 2018, and it is the latest Canadian cannabis producer to gain entrance onto the New York Stock Exchange. For these reasons, the collapse of CannTrust would have a significant impact on the entire Canadian cannabis industry.

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