While the metaphor may yet prove true, CannTrust only appears to be going up in flames in this reader-submitted cellphone photo from December 2018. Low cloud or fog often makes particularly evident the use of artificial grow lights at the industrial cannabis grow operation in Fenwick. SUPPLIED PHOTO

 

Company receives delisting threat from NYSE

The New York Stock Exchange doesn’t do penny stocks.

The latest twist in CannTrust’s downward spiral was wound last week, when Wall Street issued a threat that the company is en route to being delisted from the world’s largest stock exchange.

The New York Stock Exchange (NYSE) hit CannTrust with a “continued listing” notice on December 10, warning them that their share price had to rise above one dollar US in order to stay listed. The NYSE requires the average closing price of a listed company’s common shares to be at least one dollar per share over a consecutive 30-trading-day period. As of December 9, the 30-day average closing price of the company’s shares was 97 cents (approximately $1.27 Canadian). It closed last week’s session at 84 cents US ($1.11 Canadian).

CannTrust’s share price has dropped as much as 90 percent since last summer, when multiple Health Canada violations at the company’s Fenwick grow operation were uncovered thanks to the actions of a whistleblowing former employee.

In accordance with NYSE rules, CannTrust has six months to regain compliance. During this period, the company’s common shares will continue to be listed and traded. CannTrust can regain compliance at any time during the six-month period if its common shares have a closing price of at least one dollar US on the last trading day of any calendar month during the period, and also have an average closing price of at least one dollar over the 30-day period ending on the last trading day of that month.

Whether this is likely is anyone’s guess. In addition to plummeting investor confidence, little to no revenue is coming into the company, given that its cannabis sales licence is suspended. The company was forced to destroy a staggering $77 million Canadian of inventory that was grown illegally, mostly at the Fenwick site. In order to cut costs, CannTrust has also laid off approximately 40 percent of its staff since September, including dozens of lost jobs in Pelham. Those cutbacks did not prompt a meaningful rebound in the company’s share price.

According to one Bay Street analyst the Voice spoke with not for attribution, outside of a buyout one possibility for CannTrust could be a reverse stock split—in which a troubled company consolidates the number of existing shares of stock into fewer, proportionally more valuable shares. Such an action, however, would be subject to a complex series of regulatory approvals.