Marijuana News Today: License Suspension a Big Warning Sign for Pot Stocks
Marijuana News Today
The marijuana news today has us focusing in on CannTrust Holdings Inc (NYSE:CTST), which officially had its license suspended by Health Canada following an audit earlier in the summer.
CannTrust stock has been on a downward spiral ever since it was announced that the company would have much of its inventory suspended and that its license would be up for review following a Health Canada audit finding that cannabis was being grown in unregulated rooms. (Source: “CannTrust Discloses Notice of Licence Suspension,” CannTrust Holdings Inc, September 17, 2019.)
The company is now suspended from producing cannabis, other than cultivating and harvesting existing plants, and it cannot sell cannabis until it has its license reinstated. This entails a full suspension of its licences for cannabis drugs, medical sales, research, and standard processing.
That means the company can finish harvesting the crop currently in production and can do things like trim said plants or otherwise process them, but it cannot sell any of the product. Furthermore, the com
pany is prohibited from beginning its next batch.
As you can imagine, this is devastating news for CTST stock owners. This effectively shuts the company out from being able to turn a profit for the foreseeable future. Every day the company isn’t producing marijuana is another day of lost revenue and an accumulation of overhead expenses.
What CannTrust needs to do right away, then, is find a way to get back in compliance with Health Canada’s standards as fast as humanly possible.
Health Canada outlined several steps the company could take, including:
Measures to ensure that cannabis will be produced and distributed only as authorized, including measures to control the movement of cannabis in and out of CannTrust’s site;
Measures to recover cannabis that was not authorized by CannTrust’s licence;
Measures to improve key personnel’s knowledge of, and compliance with the provisions of the Act and the Regulations that apply to CannTrust; and,
Measures for improving the manner in which records are kept, including a plan to improve the inventory tracking, and any interim measures to ensure that information provided to Health Canada can be reconciled.
While the company did state it is moving to address these issues, this is, for me, an unforgivable offence for a pot company to make. The one job of these businesses is to produce and sell pot. Ensuring that you’re in compliance with the laws of the land is essential.
The dereliction of that due diligence is reprehensible. As a result, CannTrust stock has been is getting crushed, as the following chart shows.
Chart courtesy of StockCharts.com
The future is bleak for CTST stock. Frankly, I don’t see how the company can make its way back for a long while, considering it will be heavily punished in its next quarterly report due to the license suspension.
While there may come a day when CannTrust stock is able to rise again, right now it is in the dumps. The company will need to perform a number of small miracles if it can come close to rivaling its former glory in a speedy manner.
More broadly, the marijuana industry needs to take note: don’t mess with government regulators.That may seem obvious, but companies can sometimes get itchy fingers and get so wrapped up in financial growth that they cut corners. Cutting corners, as is usually the case, was a devastating mistake for CannTrust Holdings to make.
From bad to good in the marijuana news today, the pot stock market is generally performing decently, with minor gains across the board (and a few outliers that are falling behind).
One company on the rise is Curaleaf Holdings Inc (OTCMKTS:CURLF, CNSX:CURA). The U.S. marijuana company continues to impress, with another stock price gain of 2.5% in early-morning trading today. CURLF stock is also up by two percent over the past five days.
As I always remind our readers about Curaleaf stock, this is a company that is quickly growing, and it operates in the largest marijuana market on earth: the United States.
American legalization of pot has gotten to such a point that the country easily outpaces Canada for the number of consumers and the amount of money at play. Heck, California alone is a larger market than the entirety of Canada.
As such, CURLF stock is particularly strong because the company operates in several states with tens of millions of residents and multi-billion- dollar marijuana markets.
Curaleaf stock has become one of my top pot stocks. In fact, it’s quickly becoming my favorite.
The reason is simple: huge potential for growth and profits, with an already solid base in the largest marijuana market in the world.
To top it all off, there are very few publicly traded American marijuana companies that are comparable in size, precisely due to the federal prohibition still in place. This makes CURLF stock a unique opportunity with few rivals.
While I’m very excited about the future of Curaleaf stock, here’s another stock that is beginning to intrigue me. Tilray Inc (NASDAQ:TLRY) has had a rocky road so far as a publicly traded company, but it appears that things could turn around for the pot stock in the near future.
Tilray stock was up about one percent in early-morning trading today. Over the past five days, Tilray stock has remained flat.
But here’s the thing about TLRY stock: it appears to have hit its bottom.
After the stock’s absurd growth in value following its initial public offering (IPO)—the first marijuana IPO on a major U.S. stock exchange—Tilray stock proceeded to slowly bleed away those gains for the next year.
It’s still well above its IPO price of $17.00, currently trading at around $30.00, but for many investors who got in late on TLRY stock, it has been a loser.
But that may soon change. The stock is holding firm at $30.00 and doesn’t seem to be falling any longer. On top of that, the company has managed to weather the latest marijuana stock market correction without too much pain.
As a result, if its stock price holds long enough at $30.00, investors may gain more confidence in Tilray and flock back, potentially sending shares higher.
CURLF and TLRY Stock Performances
The performances of CURLF stock (black line) and TLRY stock (blue line) over the past week are seen in the chart below:
Chart courtesy of StockCharts.com
The marijuana news today is one of foreboding and warning in the headlines and tepid growth on the pot stock market.
CannTrust losing its license was long rumored to be in the works, but now that it has happened, the company’s stock has been gutted. I’m not sure when—or even if —CTST stock will be able to stage a comeback, so investors should think twice before jumping in on CannTrust stock.
On the flip side, we have stocks like Curaleaf stock, which is poised for larger gains in the future, and Tilray stock, which is turning into a very intriguing investment.