Hexo’s shares plunged nearly 30 per cent Friday after the Ottawa-based cannabis producer announced it was issuing US$140 million worth of new units that consist of shares and future purchase warrants.
Hexo said it was issuing 47.45 million units at a price of US$2.95 per unit. A.G.P./Alliance Global Partners and Cantor Fitzgerald Canada Corporation are acting as lead underwriters and joint bookrunners for the offering, while ATB Capital Markets is acting as co-manager.
Hexo has been issuing new shares at a steady clip as it seeks to finance its ambitious expansion plans. In the past two and a half years, its total number of listed shares has tripled to more than 152 million, with each new offering tending to dilute the value of existing shares.
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The markets did not react favourably to the latest move.
Hexo’s stock ended the day down 28 per cent at $2.96 on the Toronto Stock Exchange. That continues a months-long slide that’s seen the firm’s shares fall from a 52-week high of more than $13 in early February after an early 2021 surge that saw their price nearly triple.
Funds from the latest offering are expected to help pay for the Ottawa firm’s $925-million acquisition of Toronto-based Redecan, which Hexo agreed to buy in late May for $400 million in cash and $525 million in shares.
Hexo also plans to use some of the funds to finance its growing U.S. operations.
The company finalized a deal in June to acquire a 50,000-square-foot cannabis production facility in northern Colorado. Hexo said it will use the facility to give U.S. consumer packaged goods brands access to its technology, which it’s been using to drive down the costs of cannabis in Canada and create more products priced at the same levels of pot sold through the illicit market.
Earlier this week, Hexo announced it was transferring its U.S. market listing from the New York Stock Exchange to the Nasdaq in what appears to be a move to cut costs. The shift is expected to take place after markets close next Monday.