Hexo is done! Sell now and move on to Extraction Companies"
HEXO Last, but not least, investors would be smart to avoid Quebec-based grower HEXO (NYSE:HEXO) like the plague this month.
Like its peers, HEXO has been a busy bee in the cost-cutting department. To account for supply bottlenecks in Ontario and a resilient black market, HEXO announced 200 job cuts and has chosen to idle the Niagara facility (acquired with the Newstrike Brands purchase) as well as 200,000 square feet of its flagship Gatineau campus. In total, I believe HEXO's peak output has been reduced by around a third, which is concerning considering that HEXO's management believes it needs 20% market share throughout the country to become profitable.
HEXO is also facing some serious cash concerns. The company has raised approximately CA$100 million from a combination of stock offerings and a convertible debenture in recent months, but this doesn't look as if it'll be enough to cover ongoing operating expenses or cover debt payments when they become due.
As the icing on the cake, HEXO's share price fell to within $0.11 of the $1 minimum share price required for continued listing on the New York Stock Exchange (NYSE) this past Thursday, Feb. 27. Although a reverse stock split is an option for continued listing, it's looking increasingly likely that HEXO's stay on the iconic NYSE may be short-lived.
Sean Williams has no position in any of the stocks mentioned. The Motley Fool recommends HEXO. The Motley Fool has a disclosure policy."