The CannTrust Holdings (NYSE:CTST) scandal just keeps on getting bigger. While we're still waiting on a decision from Health Canada on what its punishment will be in relation to illegally growing marijuana, last week the public learned of even more potential problems: Multiple sources told BNN Bloomberg that seeds from the black market found their way into CannTrust's operations.
The industry has been hit hard
It may be a bit unsurprising for a company that's already faced allegations that it created fake walls to hide illegal growing operations from regulators, but it still has had a negative impact on the industry as investors are clearly showing a lack of confidence in pot stocks. Canadian producers, in particular, have been struggling. Since July, which is around the time that the CannTrust scandal first emerged, the Horizons Marijuana Life Sciences Index ETF (OTC:HMLSF) has fallen by about 18%. And to make matters worse, there has also been lots of negative press surrounding Curaleaf (OTC:CURLF) making exaggerated claims on what its products can do, drawing the attention of the U.S. Food and Drug Administration. There have also been claims made by short-sellers that Hexo (NYSE:HEXO) might be in trouble as a result of aggressive advertising practices.
The worst might not be over for the industry, because until Health Canada hands down a decision on CannTrust, there's going to be a big question mark surrounding what kind of precedent Canadian regulators will set. It has taken just three months for CannTrust to lose more than two-thirds of its value, and there could still be more losses to come. Investors could be worried about which company will be the next to get into trouble.
The industry has been hit hard
It may be a bit unsurprising for a company that's already faced allegations that it created fake walls to hide illegal growing operations from regulators, but it still has had a negative impact on the industry as investors are clearly showing a lack of confidence in pot stocks. Canadian producers, in particular, have been struggling. Since July, which is around the time that the CannTrust scandal first emerged, the Horizons Marijuana Life Sciences Index ETF (OTC:HMLSF) has fallen by about 18%. And to make matters worse, there has also been lots of negative press surrounding Curaleaf (OTC:CURLF) making exaggerated claims on what its products can do, drawing the attention of the U.S. Food and Drug Administration. There have also been claims made by short-sellers that Hexo (NYSE:HEXO) might be in trouble as a result of aggressive advertising practices.
The worst might not be over for the industry, because until Health Canada hands down a decision on CannTrust, there's going to be a big question mark surrounding what kind of precedent Canadian regulators will set. It has taken just three months for CannTrust to lose more than two-thirds of its value, and there could still be more losses to come. Investors could be worried about which company will be the next to get into trouble.
