Why the Creso Pharma (ASX:CPH) share price is down 29% this week

It has been another difficult day for the Creso Pharma Ltd (ASX: CPH) share price on Thursday. In early afternoon …

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It has been another difficult day for the Creso Pharma Ltd (ASX: CPH) share price on Thursday.

In early afternoon trade, the cannabis company's shares are down 9% to 10 cents.

This means the Creso Pharma share price is now down approximately 29% this week.

Why is the Creso Pharma share price crashing this week?

Investors have been heading to the exits in droves this week. This follows the company confirming reports that the Australian Federal Police were executing a search warrant at the Sydney offices of Everblu Capital.

This was to assist the Australian Securities and Investments Commission (ASIC) with an investigation.

Creso Pharma Chairman, Adam Blumenthal, is a director of Everblu Capital.

And while the company advised that it is yet to be able to independently verify the nature of the enquiry or determine whether the matter relates to Creso Pharma, clearly some shareholders aren't waiting around to find out.

Everblu Capital has been Creso Pharma's corporate advisor and lead manager of its various capital raisings in recent times. This has seen Everblu receive millions of Creso shares and options, and it's earned significant fees since its appointment.

At the end of FY 2020, EverBlu owned about 20.1 million shares and about 66.3 million options.

Since then, EverBlu Capital was involved in advising Creso Pharma on its bonus options issue in October.

What's next?

Given EverBlu Capital's close ties with Creso and the uncertainty caused by this investigation, it is likely that the Creso Pharma share price will remain volatile until the matter is resolved.

When that will be is unclear at this stage.

Motley Fool contributor James Mickleboro 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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