Hexo shares drop 9% as Gatineau pot firm looks to raise US$20M

hexo

Gatineau-based cannabis company Hexo announced Friday it plans to raise $20 million from institutional investors as the company looks to rebound from a disappointing end to 2019.

Hexo plans to raise the funds through an offering of common shares and warrants on the Toronto and New York stock exchanges next week. The initial shares will be priced at $1.67, with warrants entitling investors to purchase additional shares at $2.45 each following a five-year term. (All figures USD.)

The financing, which Hexo expects to close on Jan. 22, will go towards working capital and general corporate purposes as well as funding the cannabis grower’s product innovation strategies. Hexo raised $25 million in a similar share offering earlier this month.

Hexo’s stock stumbled following the news the company would issue additional shares, diluting the value of shares held by existing investors. Shares of Hexo were trading at $1.62 on the NYSE at the end of the day, down more than nine per cent from opening.

Hexo also said this week that it was eliminating its chief innovation officer position, which was vacated after Veronique Hamel – who joined Hexo a year ago – left the firm. Additionally, Hexo announced that James McMillan will become its chief development officer.

The latest personnel shakeup follows a series of executive departures in recent months, with the firm’s chief financial, marketing, manufacturing and brand officers all leaving the company within a short period of time. The company also missed its fourth-quarter earnings expectations and announced it was cutting 200 jobs in October to ensure its “long-term viability.”