ANOTHER VIEW of HEXO - FOR Q HEXO
Finally, cannabis stock investors are strongly urged to avoid Quebec-based HEXO (NYSE:HEXO) for the second half of 2020, if not beyond.
Similar to Aurora Cannabis, HEXO is in the midst of a massive cost-cutting campaign that's designed to drastically reduce its operating expenses and move the company toward profitability. HEXO is attempting to accomplish this by halting production at select facilities and reducing staff. While this is a smart move given the state of marijuana demand in Canada, it's by no means a business-saving maneuver for the company.
The first thing you need to know about HEXO is that it's operating as a going concern, at least according to its quarterly filings with SEDAR in Canada. Companies that are labeled as going concerns typically don't have the capital on hand to cover their expenses over the coming 12 months. This is why we've seen HEXO pare back its spending and sell the Niagara facility for a meager CA$10.25 million.
To build on this point, HEXO's primary means of raising capital at the moment is to sell its common stock. The company's at-the-market offerings are continuing to balloon its share count and dilute what remaining value its shares have left. It's also not helping HEXO's case to remain listed on the New York Stock Exchange. With the exception of three trading sessions over the trailing three-month period, HEXO has closed below the $1 minimum threshold for continued listing on the NYSE.
But the most damning evidence of all might come from CEO Sebastien St-Louis, who in October 2019 commented that the company would need to secure 20% market share in Canada to become profitable. That's a seemingly impossible task given that the company is simply trying to reduce its costs enough to survive at this point.
GLTA.