An activist shareholder is pushing for an overhaul of Gatineau-based cannabis producer Hexo’s board of directors in the wake of the firm’s mounting debt woes and tumbling stock price.
Adam Arviv, who owns about two per cent of Hexo’s shares, announced this week he plans to nominate five new directors – including himself – to Hexo’s eight-person board in a bid to get the company back on track after a “disappointing performance” that’s seen its shares plummet more than 90 per cent over the past 12 months.
“The market has spoken loudly, and Hexo shareholders have made it clear that they have no confidence in the direction of the company and in the ability of the incumbent board to right the ship and reverse the downward slide,” Arviv said in a news release Wednesday night. “Without monumental change, Hexo Shares will continue their unrelenting descent.”
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It’s the latest salvo from Arviv, who has been sparring with Hexo management for months. Last fall, he blasted the leadership of then-CEO Sebastien St-Louis in a letter to the board, citing “recent dilutive financings, the CEO’s misalignment with shareholders, and a lack of basic business skills to lead.”
Acquisition tear
His call to oust more than half the company’s board continues a turbulent stretch for Hexo, which went on an acquisition tear in 2021 that triggered concerns among investors who worried the company’s shares were becoming overly diluted as it issued new stock to help pay for the transactions.
The company shook up its C-suite last fall, replacing St-Louis with food and beverage industry veteran Scott Cooper in October. The move failed to halt a slide that’s seen the firm’s shares nosedive amid debt issues stemming from hundreds of millions in loans Hexo used to finance its M&A activities.
The Nasdaq exchange, which hosts Hexo’s shares in the U.S., informed the company this week that it is not in compliance with the exchange’s minimum bid price requirements. Hexo became non-compliant with the requirement when its closing bid price for common shares listed on the Nasdaq dropped below US$1 for 30 consecutive trading days.
The firm’s shares closed at 61 cents on the Nasdaq Thursday, down more than eight per cent on the day.
In a statement to OBJ on Thursday, Hexo said it is reviewing Arviv’s submission. The company said it has tried to engage in “open and constructive dialogue” with Arviv, who runs Toronto-based investment firm KAOS Capital.
“It is disappointing that Mr. Arviv has decided to proceed with this unnecessary, disruptive and expensive approach rather than continuing working with the company in a normal course,” the statement added.
Arviv’s other nominees to the board are Mark Attanasio, Craig Bromell, Rob Godfrey and Aidan Rasalingam. He said he plans to submit the nominees to replace most of the incumbent board members at the firm’s next annual general meeting slated for March 8.
