With just over a half hour before markets close, CannTrust Holdings shares are down more than 22 percent in the wake of an embarrassing disclosure.
Before markets opened this morning, the medicinal cannabis producer revealed that its greenhouse facility in Pelham, Ontario, was offside with certain Health Canada regulations.
"The non-compliant rating is based on observations by the regulator regarding the growing of cannabis in five unlicensed rooms and inaccurate information provided to the regulator by CannTrust employees," the company dislosed. "Growing in unlicensed rooms took place from October 2018 to March 2019 during which time CannTrust had pending applications for these rooms with Health Canada."
As a result, CannTrust has been ordered to hold back distribution of 5,200 kilograms of dried cannabis grown in these previously unlicensed rooms.
In addition, CannTrust is voluntarily holding back about 7,500 kilograms of "dried cannabis equivalent" in its manufacturing facility in Vaughan, Ontario. These products came from cannabis produced in unlicensed rooms.
As of 12:44 p.m. Pacific daylight time, its market capitalization was $708.8 million.
CannTrust continues growing, cultivating, harvesting, and selling cannabis from its fully licensed facilities in the two Ontario communities.
"Health Canada is conducting quality checks of product samples on hold at Pelham, with results expected in 10 to 12 business days," the company noted. "Due to the product on hold, some CannTrust customers and patients will experience temporary product shortages."
The company provides dried, extract, and capsule products to about 57,000 medical patients.
In January, it announced that it was applying for a listing on the New York Stock Exchange.
It's currently traded on the Toronto Stock Exchange and NASDAQ.