We may never know whether it was the brazen hubris of doing a promotional video in front of an unlicensed grow room filled with illegal plants, or if it was the email trail the Globe and Mail discovered yesterday that showed top brass at CannTrust (TRST.V) were not only aware the company was growing illegal weed, but actively working around Health Canada inspectors while doing so, and looking to gaslight regulators in the eventuality they got caught.
We won’t know if it was the massive wipeout of 81% of its share price this year, or the 61% valuation destroyed since the scandal came to light, or the attempted blame shift to a ‘rogue employee’ since fired, or the outraged response from the CEO that anyone would DARE suggest his fine reputation as a banker – a banker, mind you! – would be worth besmirching to grow some illegal weed.
What we do know is the CEO and Chairman of CannTrust are having their personal belongings packed for them today.
Canntrust Holdings Inc. has made immediate senior management changes and other interim actions based on the continuing investigation being undertaken by a special committee of its board of directors.
The investigation into the company’s non-compliance with Health Canada regulations and ancillary matters uncovered new information that has resulted in a determination by the board to terminate with cause Canntrust chief executive officer Peter Aceto.
In addition, the board of directors demanded the resignation of the company’s chair Eric Paul, and he complied.
I’d pay $100 to see those conversations on pay-per-view.
The head of the special committee tasked with investigating the allegations, Robert Marcovitch, will take the reins going forward on an interim basis.
He’s no slouch.
A seasoned chief executive, Mr. Marcovitch was most recently the president and CEO of K2 Sports, an international developer, manufacturer, marketer and distributor of winter sports equipment. He was previously the chief executive officer at the Coleman Outdoor Company from 2011 until 2015, and, prior to that, was chief executive officer and president of Ride Inc. from 1994 to 1999, which, prior to its acquisition by K2, was a large publicly traded company.
Made clear in the announcement: The two fired today won’t be the last ones fired.
The company is preparing to make additional operational changes in the days and weeks ahead, which will be announced in due course.
Now comes the odious task of talking to Health Canada, confessing everything that was happening under the watch of the old guard, and hoping Health Canada views a change of management as punishment enough.
I’d be shocked if that was the outcome.
Based on new information uncovered by the investigation, the company made a voluntary disclosure to Health Canada. The company will fully co-operate with the regulator in an open and transparent manner to resolve these matters fully and expeditiously.
At a current valuation of $360 million, we may still see destruction of the company share price going forward, especially if Health Canada decides to suspend – or revoke – a license.
“Our first priority is to complete the remaining items of our investigation and bring the company’s operations into full regulatory compliance. Implementing the necessary changes is essential to the interests of our medical patients, customers, shareholders and employees,” said Mr. Marcovitch.
Here’s hoping, for his family’s sake, Peter Aceto hasn’t made any big‑ticket purchases recently, because it’s highly likely he’s not going to be working for a while.
Which might be something the folks on other boards he sits on, such as Every, Mesh, Senso, troupe and NestReady, will want to look into.
The astonishing thing about all this is… why?
I mean, why risk hundreds of millions in investor money, your licenses, your jobs, the jobs of others, your reputation FOREVER, on jacking your production numbers by an amount nobody actually gives a shit about?
That’s going to be the big question that will likely never be answered: why did these rubes lose everything for so little?
One other question: Do they still own stock in the company that just dropped them?
— Chris Parry
FULL DISCLOSURE: No dog in the fight, but man am I pissed these nimrods have ruined it for everyone else.