Ottawa's Hexo revises share consolidation plan as stock price on NYSE rises

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Ottawa-based cannabis producer Hexo has revised its plan to consolidate its shares in an effort to comply with the US$1 minimum share price required to maintain its listing on the New York Stock Exchange.

Under the original proposal announced in October, Hexo shareholders would receive one post-consolidation share for every eight shares they hold. The firm said Monday it has amended the offer to one post-consolidation share for every four shares held.

When the initial offer was made more than a month ago, Hexo’s shares were hovering around 60 cents on the NYSE. Since then, they’ve risen to just above the US$1 threshold.

“We believe that our solid financial position and the execution of our growth strategy is not yet reflected in our market valuation,” Hexo chief executive Sebastien St-Louis said in a statement explaining the decision. 

“We are number one in Canada in key categories such as beverages and have continued to gain sales momentum in critical markets including Ontario and Alberta. We are currently sitting fourth in recreational cannabis sales in Canada, with the gap between us and third place narrowing, while the gap between us and those behind us has widened.”

In its latest earnings report in October, the company said its net loss ballooned to $546.5 million for the fiscal year ending July 31, compared to a loss of $69.6 million a year earlier. 

While Hexo earned record net revenues of $27.1 million in the fourth quarter and its overall 2020 revenues jumped 70 per cent year-over-year to $80.6 million, the cannabis producer continues to accrue significant losses as it scales up production. 

Hexo’s proposal requires shareholder approval at a meeting set for Friday.

– With files from the Canadian Press