NOT GOOD ARTICLE FOR HEXO HEXO
The third and final pot stock you'd be wise to avoid in September is yet another Canadian licensed producer: HEXO (NYSE:HEXO).
To keep with the ongoing theme, shareholders of HEXO have witnessed their vision of the company completely shift over the past 11 months.
At one time, HEXO looked like a surefire winner with minimal risk. It had signed a 200,000 kilo-in-aggregate deal with its home province of Quebec over a period of five years, and had acquired Newstrike Brands to bolster its annual production capacity to around 150,000 kilos of cannabis. Investors thought they were buying into a company that had plenty of committed cannabis and a clear focus on higher-margin derivatives.
But over the past couple of quarters, HEXO has spent much of its time backpedaling to control its costs. The Niagara facility, which was acquired in the Newstrike deal, was sold for a meager $10.25 million Canadian in mid-June. Meanwhile, the company has shed jobs and reduced operating capacity at its flagship Gatineau campus.
Similar to Aurora Cannabis, HEXO has had little choice but to turn to at-the-market offerings to raise capital. Three weeks ago, it completed a CA$34.5 million at-the-market offering program, with nearly 34 million shares of stock being sold. This constant dilution continues to pressure existing shareholders.
And as the icing on the cake, HEXO has been trading below the $1 continued minimum listing price for the New York Stock Exchange for months. After receiving a delisting notice in April, a coronavirus pandemic-related extension will give HEXO till Dec. 16 to get its share price back into compliance. It's looking very possible that a reverse split could be on the horizon to avoid delisting.
HEXO is a mess and is best avoided by long-term cannabis investors.