Its Time To Sink or Swim For Hexo Corp.

Its Time To Sink or Swim For Hexo Corp.

During the last month, HEXO Corp. (HEXO.TO (HEXO) reported a number of significant developments centered on reducing expenses and strengthening its balance sheet. These developments come at a crucial time for the Canadian cannabis producer and we believe that our readers need to be aware of this.

2020 has been a challenging year for HEXO and the company could find itself de-listed from the Nasdaq as the shares are trading below the $1 level. If the shares cannot break above this level, HEXO could be forced to conduct a reverse stock split that would result in a higher stock price and fewer shares outstanding. HEXO has recently been trading in a volatile pattern in June and we want to provide an update on the opportunity.

On Wednesday, HEXO reported to have completed the previously announced sale of its Niagara facility for approximately $10.25 million. The Canadian cannabis producer expects to use the proceeds to fund additional expansion of its Belleville facility and we will monitor how it is able to execute on this.

In March, HEXO announced plans to market the facility for sale following a strategic review of its cultivation assets on account of an excess of capacity in the market. The market did not initially respond well to the planned divesture and only time will tell if the decision was beneficial for the business.

Prior to announcing the completion of the sale of the facility, HEXO plunged lower after it announced an at-the-market equity program that allows the company to issue up to C$34,500,000 of common shares. HEXO is working to strengthen its balance sheet and we will monitor how the management team is able to execute on previously announced initiatives.

Going forward, we would not be surprised if HEXO was forced to complete a reverse stock split and follow the path of Aurora Cannabis (ACB.TO) (ACB). Aurora was the first large scale Canadian cannabis producer that was forced to conduct a reverse stock split and it appears that HEXO could be following this strategy.

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Authored By

Anthony Varrell

Anthony Varrell is Managing Director of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.

Published at Fri, 19 Jun 2020 11:11:58 +0000

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