Troubled Canadian cannabis company CannTrust Holdings Inc. said on Monday it has received a report from Health Canada informing it that its manufacturing facility in Vaughan, Ontario, does not comply with certain regulations and sends the stock down by 26% .
already in trouble with the regulator over unlicensed wax at a plant in Pelham, Ontario, said Health Canada found the violations during an inspection July 1
The regulator found that the Vaughan plant uses rooms that were converted from operating areas to storage areas since June 2018 without permission; it had constructed two new areas without prior approval, one of which was used to store cannabis; had inadequate security control of the facility; had inadequate investigations and controls with quality assurance; used standard operating procedures that did not meet the requirements of regulations; and did not store documents or information in a manner that would allow the regulator to complete its audit in a timely manner.
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" As previously announced, the company implemented a voluntary ceiling on the sale and shipment of all cannabis products while Health Canada reviewed its manufacturing facility in Vaughan, Ontario, "states a statement." CannTrust continues to work closely with Health Canada and will provide further details on the wait and other developments as they become available. "
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Korey Bauer, portfolio manager for the Cannabis Growth Equity Fund launched by Foothill Capital Management said the news is only the latest blow to CannTrust.
"It's unfortunate that the company continues to disappoint and the negative news ethylene continues to pile up, ”he said.
Bauer noted that the CannTrust stock had a large meeting late on Friday, due to the rebalancing of an exchange-traded fund and card coverage, "which we know appears to be short-lived."
The stock exploded 40% in the last minutes of trading, after using the rest of the session in red.
The company also said on Monday that it has prepaid a $ 13.3 million ($ 10 million) mortgage loan to the Meridian Credit Union, which was secured by the Pelham facility.
Health Canada seized five tonnes of the company's cannabis from that plant in July, when it discovered the illegal breeding grounds. Shares have been hammered since then, after media reports found that top management knew about illegal cultivation and that some of that cannabis had been exported to Denmark, a violation of Canadian drug law.
The company fired CEO Peter Aceto, forcing President Eric Paul to resign. On Friday, KPMG said they are monitoring 2018 and the March quarter because the information in them could no longer be trusted. KPMG made the decision after a special committee set up to investigate Pelham activity recently revealed information.
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In August, the special committee said it was considering options for the company that include a possible sale.  Shares are down 47% in the last three months, while ETFMG Alternative Harvest ETF MJ, -0.56% has fallen 17% and S&P 500 SPX, -0.66% has gained 1.3%.
Additional reporting by Max A. Cherney
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