BLACKROCK Municipal Income TRUST V.BFK.P

Breakdown of Nasdaq Article

[quinlash]

Article Being Referred to:
https://www.nasdaq.com/articles/3-reasons-to-dump-shares-of-hexo-today-2020-06-26


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Canadian cannabis company HEXO (NYSE: HEXO) hasn't been performing well this year. Its share price is down more than 50% year to date, worse than the broad holdings of the Horizons Marijuana Life Sciences ETF (OTC: HMLSF), which has fallen 19% over the same period.

Q Comments - QTR over QTR sales has risen 30% which indicates better than expected sales.  There are times when a share price does not align with the direction of a company.  This is the nature of the markets and not an indication of the future value of a stock.  

Traders considering the direction of the share price may opt to go short on the stock, others will see it as a buying opportunity, depending on how they see the company performing over time.  QTR report results are the ultimate indicator of the health and future potential of a company.

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If there's one thing that can cripple a company's flexibility, it's debt. HEXO released its third-quarter results on June 11, and the company's balance sheet wasn't all that strong. One of the concerns that investors should have is that as of April 30, HEXO recorded total liabilities of CA$146.1 million. That's up from CA$89.9 million back on July 31, 2019.

Q Comments:  HEXO, like all Producers, are developing their businesses in an emerging market.  Increased debt is not surprising as HEXO was developing the Belleville facility which has been noted as being "Highly Automated".  There are costs associated with developing any facility.  Until the company becomes cash flow positive it is reasonable to expect debt will increase in the short-term.  How much debt is acceptable by investors will vary however HEXO is forecasting to be EBIDTA positive within Calendar Year 2020 / Jan 2021 at latest.

Investors in the sector should also be comparing debt load of HEXO to other major players such as Aurora Cannabis and Canopy Growth.  Both ACB and Canopy are carrying much larger debt loads and are not expected to cross the finish line to becoming EBIDTA positive before HEXO (Canopy has no real direction on EBIDTA since last report)

Cash balances on hand for HEXO can carry the company into the next half of Fiscal year 2021.  Cash on-hand, plus the ATM offering, allows HEXO the flexibility to access cash on an as-needed basis.

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 key reason for the increase is that HEXO now has CA$48.7 million in convertible debt and CA$25.1 million in lease liabilities that it didn't have last year, and both are non-current liabilities. Rising debt levels could make it more difficult for the Quebec-based cannabis company to raise funds. Raising money during the COVID-19 pandemic and recession was already going to be difficult to begin with. A less-than-ideal balance sheet isn't going to help things.

Q Comments - The debentures have already been converted, this appears to an over-sight in the article.  Raising capital does not appear to be an issue for HEXO, despite the virus, as Canacord has already provided funding in the form of buying shares in the company, last round they paid over market value for those shares.  Initial round of financing was provided at the height of the virus. 


As Noted:

Traders viewing such articles may opt to go short on the stock with the expectation that the share price will fall.  Some investors will compare the comments in the article to actual QTR report results etc and may see any downward movement in the share price as a buying opportunity with the expectation that the company will indeed become EBIDTA positive as early as mid-summer (2020 Year end Report) or as late as Jan 2021.

Money can be made with any change in shareprice, UPWARD AND DOWNWARD.  Traders on the stock will be trading in accordance to which way they believe the share price will go.

Q