5 thoughts of a shareholder

<h2 class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "1. Peter Aceto must leave "data-reactid =" 66 ">1. Peter Aceto must leave

I do not take this decision lightly, but the CEO, Peter Aceto, must be open and new leadership sought. Aceto said in the press release:

Our team is focused on establishing a culture of transparency, trust and excellence in all aspects of our business, including our interactions with the authority of regulation. We have made many changes to correct this with Health Canada. We have made mistakes in judgment, but the lessons we have learned here will be very helpful for us to move forward.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "His admission of" errors of judgment "suggests that he knew that the company was circumventing Canadian cannabis regulations and that its admission of non-compliance was indicative of a lack of transparency and trust. Namaste and Aphria data-reactid = "70"> It seems logical that CannTrust should separate from Aceto in due course. "His errors in judgment" suggest that he knew that society was subverting Canadian cannabis. In addition, the admission of non-compliance of the company demonstrates a lack of transparency and trust. As Namaste and Aphria separate from their CEOs as a result of their respective scandals, it seems logical that CannTrust separates from Aceto in due course.

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Source of the image: Getty Images.

<h2 class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "2. Margins will deteriorate in the short term "data-reactid =" 92 ">2. Margins will deteriorate in the short term

Mb (0) – sm Mt (0.8em) – sm "type =" text "content =" Before this announcement, CannTrust already occupied Increased expenses related to the Niagara Expansion and the purchase / lease of land in order to start a large outdoor growing business. did not go exactly in the right direction, at least in the short term. "data-reactid =" 93 "> Prior to this announcement, CannTrust was already facing increasing expenses related to the Niagara Expansion and the purchase / lease of land for the purpose of divesting itself. This meant that his margins were not going in the right direction, at least in the short term.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "With the announcement of the inventory of 5,200 kilograms held by Health Canada and 7,500 kilobyte equivalents in Vaughan, the release indicates that some customers (which may include Canadian provinces) may be facing temporary supply shortages. buy cannabis wholesale to make up for the shortage. " Tilray& nbsp; bought bulk pot to make up for its own growing shortage, and this has been wreak havoc on his margins. I think CannTrust should be the same until 2019. "data-reactid =" 94 "> With the announcement that 5,200 kilograms of inventory are held by Health Canada and 7,500 kilograms of equivalent are being held in Vaughan, the press release indicates that some customers (likely to include the Canadian provinces) could face temporary supply shortages.This is pretty much the code for "we are going to buy cannabis wholesale to make up for the shortage". Tilray buys bulk pot to offset his own growing shortage, which is wreaking havoc on his margins. I think CannTrust should be the same thing until 2019.

<h2 class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "3. This is not a substantial amount of production in question "data-reactid =" 95 ">3. This is not a substantial amount of production in question

<p class = "canvas-atom-canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Although no amount of nonconformity This is a small percentage of CannTrust's production potential on a larger scale.When it is fully operational, CannTrust is expected to generate approximately 100,000 kilos per year, combined, from Vaughan and Niagara, with 100,000 additional kilos to 200,000 kilos per year of his outdoor growing operations. Part of this outdoor crop should end up in licensed clinics, but much of it will be used for extractive purposes to create derivatives. "Data-reactid =" 96 "> While no amount of non-compliance is acceptable, investors should also understand that once fully operational, CannTrust is expected to generate approximately 100,000 kilograms per year, combined, from Vaughan and Niagara, as well as an additional 100,000 to 200,000 kilograms per year through outdoor growing facilities, some of which is expected to be grown in licensed clinics, but a large portion will be used for extractions. to create derivatives.

In total, the production of 12,700 kilos of equivalent kilo set aside at the present time only seems to be a lot of cannabis because no farmer has almost reached full capacity. In a year, this will represent a relatively small percentage of total annual production.

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Source of the image: Getty Images.

<h2 class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "4. I wait until the hammer falls before moving on to the action "data-reactid =" 119 ">4. I wait until the hammer falls before moving on to the action

<p class = "canvas-atom-canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Although CannTrust shares have decreased by or I first bought them at the beginning of MayI am not inclined to buy more for the moment. "Data-reactid =" 120 "> Although CannTrust's shares have declined compared to where I originally bought them in early May, I'm not inclined to buy more.

I think the company offers a lot of value given its production potential, its derivatives, its supply contracts in Canada and the recent announcement of a breakthrough in the US cannabidiol market. But I do not know yet what kind of sanction could be imposed by the regulators for the blatant disregard of the company vis-à-vis the regulation of licenses. My personal assumption is that CannTrust will face a fine, will be given cannabis in reserve, and then expect additional inspections from Health Canada. However, it could take weeks before we get any clarification on this situation.

5. Do not be surprised if a low-ball offer pops up

Last but not least, do not be shocked if another marijuana stock arrives with an inexpensive offer to acquire CannTrust.

<p class = "canvas-atom-canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "For those who may not remember, Green growth brands (NASDAQOTH: GGBXF) was aimed at capitalizing on Aphria's misfortune with a hostile offer in shares at the beginning of the year. During the three-month period from early September to early December, Aphria lost about two-thirds of its value, resulting in short seller report who alleged that the company had overpaid its holdings in Latin America As the third largest producer in Canada, Green Growth Brands attempted to sell and devour Aphria at a good price. Finally, the green growth offer was refused"data-reactid =" 124 "> For those who may not remember it, Green growth brands (NASDAQOTH: GGBXF) was aimed at capitalizing on Aphria's misfortune with a hostile offer in shares at the beginning of the year. Between the beginning of September and the beginning of December, Aphria ended up losing about two-thirds of its value, which resulted in a report from a short-seller who alleges that the company has too much paid for his assets in Latin America. As the third largest producer in Canada, Green Growth Brands has attempted to sell and devour Aphria at a great price. Finally, Green Growth's offer was refused.

It will come as no surprise that CannTrust is issuing a low bullet deal, based on the findings of Health Canada's findings.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " More from The Motley Fool "data-reactid =" 126 "> More from The Motley Fool

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Sean Williams owns shares in CannTrust Holdings Inc. The Motley Fool recommends CannTrust Holdings Inc. and Namaste Technologies. The Motley Fool has a disclosure policy."data-reactid =" 134 ">Sean Williams owns shares in CannTrust Holdings Inc. The Motley Fool recommends CannTrust Holdings Inc. and Namaste Technologies. Motley Fool has a disclosure policy.