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CannTrust interim CEO Robert Marcovitch.


CannTrust Holdings Inc. is in "regular contact” with the Ontario Securities Commission, but has not been told it is under formal investigation by securities regulators, says the company’s interim CEO, Robert Marcovitch.

“We’ve been very transparent with everything we’ve been doing, what we’re doing and how we’re doing it. That dialogue with the OSC is ongoing and happens on a very timely basis," said Mr. Marcovitch, who took over the role after the company fired Peter Aceto as chief executive officer last Thursday.

“We have not been directly in touch with the SEC because we work with the OSC as the principal regulator being on the Toronto Stock Exchange,” he added, referring to the U.S. Securities and Exchange Commission. CannTrust also trades on the New York Stock Exchange, and has sold securities in the United States.

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Health Canada is investigating CannTrust for growing thousands of kilograms of cannabis in unlicensed rooms in late 2018 and early 2019. The company also raised US$195.5-million in May using a prospectus that included production numbers from the unlicensed areas, raising questions among financial analysts about whether CannTrust could face sanctions from securities regulators. When asked directly if the company was the subject of an OSC investigation, Mr. Marcovitch replied: “Not to my knowledge.”

The OSC declined to comment.

On Monday, The Globe and Mail reported that a holding company controlled by former chairman Eric Paul sold million of dollars worth of CannTrust shares in the weeks after Mr. Paul was informed about unlicensed growing activity at CannTrust’s facility in Southern Ontario. Mr. Paul was forced to resign last Thursday by a special committee of CannTrust’s board of directors that is conducting an internal investigation. Mr. Marcovitch was the chair of the special committee before becoming interim CEO.

When asked if the special committee was looking into Mr. Paul’s trading activity, Mr. Marcovitch said: “The special committee wants that investigation to be thorough and to be completed as expeditiously as possible. As we have demonstrated, we are prepared to act decisively based on the facts when we have them."

Mr. Marcovitch, a long-time sporting goods executive and former CEO of K2 Sports and the Coleman Co., takes charge at a time of crisis. The price of CannTrust shares has declined 56 per cent since July 8 amid concerns that the company could lose its cannabis-growing license.

The steep drop in CannTrust’s share price has made the Vaughan, Ont.-based grower a potential takeover target.

“We are absolutely exploring all options for every aspect of the business, whether it’s function, financial, operational,” Mr. Marcovitch said when asked about potential takeovers. However, it’s unlikely that the company would consider bids until it gets more clarity from regulators about its future, he said.

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“I think that it’s premature to even have that conversation, at this point in time we are aggressively getting our house in order,” Mr. Marcovitch said.

When asked whether the company would retain its licence, Mr. Marcovitch said he was “not speculative by nature,” but that he hoped the board’s actions over the past few weeks would show CannTrust was serious about once again becoming compliant with regulations.

“I would like to think that we have shown a tremendous amount of transparency," he said. “There will hopefully be an acknowledgment that we are hard-pressed to completely rehabilitate ourselves.”

In research note published on Friday after the departure of Mr. Aceto and Mr. Paul, Canaccord Genuity Corp. analyst Derek Dley wrote that a licence suspension was “now more likely than not” for CannTrust.

“While we believe CannTrust’s physical assets may still be of value to other Canadian licensed producers, we do not anticipate the company being acquired in the near term given the uncertainty surrounding the penalty expected to be levied by Health Canada,” Mr. Dley wrote.

Mr. Marcovitch, who flew in from his home in Seattle on Tuesday to take charge directly, declined to provide more details about why Mr. Aceto was fired “with cause” and Mr. Paul was forced to resign. On Thursday, the company said it had “uncovered new information” during its investigation, but did it did not provide further details.

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Last week, The Globe reported that both Mr. Aceto and Mr. Paul were informed in November about numerous regulatory breaches at the company’s facilities, including unlicensed growing, seven months before Health Canada uncovered the activities.

Mr. Marcovitch, who was a member of CannTrust’s board at the time of the illicit activity, said he was not aware of any regulatory breaches.

“The thing that I wake up in the morning worrying about is how we get this house clean, get it cleaned quickly and not have to go back and clean it again,” he said.

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