CannTrust Slides as Regulator Investigates Canadian Pot Firm

(Bloomberg) -- CannTrust Holdings Inc. slid after securities regulators opened an investigation into the Canadian cannabis producer following a breach of growing rules.

Shares fell fell 4.8% to C$2.73 at 9:41 a.m. in Toronto on Friday. The Ontario Securities Commission has advised the special committee of CannTrust’s board that it’s investigating “matters and parties related to CannTrust,” the company said Thursday.

The investigation has been assigned to the Joint Serious Offences Team, an enforcement partnership between the OSC, Royal Canadian Mounted Police and the Ontario Provincial Police Anti-Rackets Branch.

Police will be seconded to the OSC investigation which will look at “serious violations of the law using the provisions of the Securities Act or the Criminal Code,” according to an email from the OSC.

CannTrust also said it will likely miss its Aug. 14 deadline to file second-quarter earnings after the Canadian government found it grew cannabis in unlicensed parts of its greenhouse in Pelham, Ontario. The Vaughan, Ontario-based company estimated that the affected inventory and assets are worth approximately C$51 million ($38 million) but said there’s “significant uncertainty” about the potential financial impact.

The company fired chief executive officer Peter Aceto and asked chairman Eric Paul to step down last week.

CannTrust shares have dropped about 58% this year.

The ongoing investigation by Health Canada may also require CannTrust to restate financial statements for the period ended Dec. 31 and March 31, the company said. On Wednesday, CannTrust said it has hired Greenhill and Co. to explore a sale.

--With assistance from Natalie Wong.

To contact the reporter on this story: Kristine Owram in Toronto at kowram@bloomberg.net

To contact the editors responsible for this story: Jacqueline Thorpe at jthorpe23@bloomberg.net;Brad Olesen at bolesen3@bloomberg.net

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