Should an Independent Director of CannTrust have known about an illegal grow of cannabis in five rooms of the company’s primary asset? According to their Interim CEO, who was an Independent Director at the time of the illegal grow, the answer is No.
CannTrust Holdings (TSX: TRST; NYSE: CTST), a Canadian licensed cannabis producer, has lost over $600 million of market value in the last sixty days. In doing so, it has provided us with an excellent case study on what not to do in a crisis or turnaround.
There were 62 transactions in the North American Cannabis sector in July 2019, including 36 private placements, 4 public offerings, 18 mergers & acquisitions and 4 shelf registrations, with a total value of C$1.8 billion. Total deal volume increased by 35% over July 2018 and transaction value increased by 10%.
For the bank, troubled situations always boils down to deciding whether to support the borrower and its turnaround plan, or not.
We have started a checklist of business points to consider and negotiate when working on a licensing deal in the cannabis space. You can’t establish value (an appropriate royalty) without first defining the transaction.
