Why the Creso Pharma (ASX:CPH) share price fell 9% before freezing

Creso Pharma shares came to a halt this afternoon, here’s what is happening…

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A dollar sign embedded in ice, indicating a share price freeze or trading halt

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The Creso Pharma Ltd (ASX: CPH) share price came under pressure this afternoon. This followed breaking news published by The Australian Financial Review involving the cannabis and psychedelics company’s non-executive chair, Adam Blumenthal.

Shares in the small-cap company tumbled 9% to 12.3 cents apiece before being placed into a trading halt. The frozen share price will remain in place until Creso can respond to the ASX’s price query.

However, the intriguing news today relates to the office raid of Mr Blumenthal.

Creso Pharma share price falls amid ASIC investigation at EverBlu

Investors weren’t playing around this afternoon after they got word of what was going on in Sydney today. It appears shareholders were quite nervous about the news that Creso Pharma’s non-exec chair, Blumenthal, had his office raided by the Australian Federal Police (AFP) today.

To be clear, the office raided was not that of Creso Pharma. Rather, it was Blumenthal’s boutique corporate advisory company, EverBlu Capital.

According to reports, officers were adorning gloves and flicking through files to assist the Australian Securities and Exchange Commission (ASIC) with an investigation. Neither the AFP nor ASIC have shed any further light on exactly what the investigation is in relation to.

The EverBlue Capital team was involved in advising Creso Pharma on its bonus options issue in October. My colleague, Zach, covered this at the time, outlining how the financial instrument could be used to raise capital if exercised.

Talk about timing

As fate would have it, the precarious situation has come to light mere days after Creso Pharma handed down its trading update for Q4 FY21. Overall, the update was reasonably positive for the company, pushing The Creso Pharma share price higher.

Furthermore, the quarter saw the company achieve strong revenue growth in its Swiss operations. However, the market’s sentiment might now be tainted by the latest developments involving Adam Blumenthal.

The Creso Pharma share price will remain halted until an announcement is provided, or until the commencement of trade on Thursday, 18 November 2021.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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