CannTrust Holdings (CTST) Stock Gains After Firing CEO

CannTrust CTST Stock News

Embattled cannabis comapny, CannTrust Holdings Inc (NYSE: CTST) has been feeling serious pain as of late. After getting caught with its hands in unregulated grow operations, the company has been losing investor interest day by day. Nonetheless, with the firing of the CEO at CTST, the stock is catching the eye of investors yet again. Here’s the scoop:

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CTST Stock Rockets After Canning Mr. Aceto

CEO, Peter Aceto was fired with cause by CannTrust Holdings as the company continues to work to recover from getting caught being involved in illegal cannabis operations. The company also announced that Eric Paul, chairman of the Board, resigned at the request of the Board of Directors.

CTST moved forward with the termination of the CEO and accepted the chairman’s resignation after reports surfaced surrounding internal correspondence proving that the executives were aware that cannabis was being grown at unlicensed facilities. This took place for a period of seven months before Canadian regulatory body, Health Canada, caught wind of the illegal activities.

CTST quickly moved forward with an internal investigation of the allegations that it was involved in growing at unlicensed facilities. Through this investigation, the company uncovered new information that led to the termination of the CEO.

The comapny appointed Robert Marcovitch as the interim CEO. Marcovitch chaired the committee charged with the internal investigation. He also previously held the CEO position at K2 Sports.

The Big Question

The big question here is whether or not the actions of executives will lead to the demise of the company. The concern is that due to the breach, Health Canada will pull the company’s license to grow cannabis. Moreover, the bad press could lead to consumers being less likely to purchase cannabis and related products under the CannTrust brand.

I take a bit of a contrarian stance here. As I’ve said in the past, I’m really not too concerned. The truth of the matter is that the cannabis industry in Canada and around the world is emerging quickly. Demand is climbing while growers can’t seem to produce enough.

All the while, the Canadian economy is benefiting greatly. The industry is creating jobs and generating some serious tax dollars. As such, it’s in the Canadian government’s best interest to keep growers, well, growing!

In this particular case, CTST has taken extreme steps early on, including firing its CEO and pushing for and receiving the resignation of a chairman. The company continues to investigate and a further shakeup may take place.

Nonetheless, Health Canada is likely to take note of the moves that the company is making on a post scandal basis. As such, while we are likely to see fees, I don’t believe that the company’s license to grow will be pulled nor that penalties will be significant enough to put the company out of business.

As far as consumer demand, that’s a different story. While demand for CannTrust grown cannabis and related products may take a hit in the short term. I believe that as the scandal dies, the company will be fully capable of rebounding.

Once this all blows over, CTST will be one of the largest cannabis producers in Canada by growing capacity as it continues to expand its capabilities. Considering that, and contingent upon my predictions above being correct, I believe that the declines caused by the illegal grow scandal are doing nothing more than presenting an opportunity to get in on the long-run gains at a discount.

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