Hexo CEO St-Louis out weeks after activist investor sounds alarm

Sebastien St-Louis
Hexo co-founder Sebastien St-Louis has stepped aside as CEO of the Ottawa-based cannabis firm, the company announced Monday. File photo

Hexo chief executive Sebastien St-Louis – who spearheaded a string of acquisitions and partnerships with corporate giants in his bid to build the “Coca-Cola of Cannabis” – has left the company he helped launch more than eight years ago in a major shakeup that also saw the firm’s chief operating officer resign.

The company has seen its share price drop by 58 per cent since the beginning of the year. It’s been criticized for issuing too many shares and diluting existing shareholders.

According to a Yahoo! Finance report, activist shareholder Adam Arviv blasted St-Louis’ leadership in a Sept. 26 letter to the board, citing “recent dilutive financings, the CEO's misalignment with shareholders, and a lack of basic business skills to lead.”

A Hexo spokesperson downplayed the report on Monday afternoon, saying St-Louis' departure "marks the next stage of the company's strategic evolution" as it looks to expand into the U.S. and Europe.

"Notwithstanding Mr. Arviv's letter, this was the right time to make this change," she said in an email to OBJ. "Given Hexo's recent acquisitions, there is a real opportunity for a new leader to leverage Hexo's market-leading position to drive growth and profitability."  

The company did not immediately name a successor, but said it is in “advanced discussions with a preferred CEO candidate” and expects to announce a new hire in the coming days. Hexo also said chief operating officer Donald Courtney has resigned but will remain with the company until a replacement is found.

St-Louis’ abrupt departure comes near the end of an eventful year that saw Hexo snap up a series of Canadian competitors and take over top spot among the country’s cannabis producers.    

“Building Hexo from the ground up to become number one in Canada has been the highlight of my career,” St-Louis said in a statement. “Without question, Hexo’s future is bright – I am so proud of the team we established, the brands we launched, and the loyalty our customers have shown us.”

Public face

After co-founding Hexo – then known as Hydropothecary – with business partner Adam Miron in 2013, St-Louis soon became one of the leading figures in the Canadian cannabis industry. He served as the public face of the company as it steadily grew from its original base in Gatineau into a multinational enterprise with facilities in Canada and the U.S.

The firm eventually went public in both countries, graduating to the TSX in 2018 and joining the New York Stock Exchange the following year before shifting to the Nasdaq this summer. 

Under St-Louis’ leadership, Hexo continued to evolve its product lines and push into foreign markets. 

In 2018, Hexo created a joint venture with brewing giant Molson Coors to develop non-alcoholic cannabis-infused beverages at an R&D facility in Belleville. The firm became licensed to sell cannabis products to the entire European Union out of a facility in Malta, and earlier this year Hexo acquired a 50,000-square-foot cannabis production facility in northern Colorado to give U.S. consumer packaged goods brands access to its technology.

Fortune 500 ambitions

St-Louis made no secret of his global ambitions, telling OBJ in 2018 that if Hexo’s plans to penetrate foreign markets succeeded, “that would mean we've become a Fortune 500 company.” 

Earlier this year, the company’s rise from a small Gatineau firm to an industry leader was chronicled in a book, The Billion Dollar Start-Up. After Hexo struck a $925-million deal to buy Toronto-based Redecan in late May – an acquisition that vaulted the company into top spot among Canadian cannabis producers – St-Louis called the firm’s ascent to No. 1 “a monumental achievement.” 

But along the way, the University of Ottawa graduate’s leadership and business acumen came under fire as the company issued new shares at a steady clip to finance its expansion plans. 

Over the past two and a half years, Hexo’s total number of listed shares has tripled, with each new offering diluting the value of existing shares. Last year, the firm was forced to consolidate its shares on the NYSE after they fell below $1 and no longer met the exchange’s listing standards.

After peaking at US$10 on the NYSE in mid-February, Hexo’s shares have since plummeted, sitting at US$1.70 in midday trading on Monday. Its shares were down five cents to $2.10 in midday trading on the Toronto Stock Exchange.