Lions, Tigers & more predictions! Oh my!Be warned, this will be a very long, in depth, cerebral read so if you prefer short sarcastic insults, useless memes, rocketship or happpy faces jifs or worthless offtopic banter this isn't for you. If on the other hand you don't mind some serious discussion on this investment, by all means sit back & enjoy. Some might question why waste my time & energy writting these long commentaries, and i'll respond with the following to appease those few critics. I do it for three reasons, i do it because i can, i do it because it's the purpose of these forums existing and finally i do it to hopefully help others. Have fun.....
I'll begin with the following. Even though i haven't had any investments in this sector in quite some time, since early 2019, everything i've predicted since then for the sector & the company (not only Hexo BTW) has more or less come to fruition. 100% accuracy friends, which is almost unheard of in investment circles. This is not a simple to task to preform mind you, as it not only requires some level of intellect & a vast amount of many years of experience in markets but also a good degree of very acute perceptive abilities to boot. As i'm not one to be tooting my own horn nor be completely selfish or just looking out for my own a$$, i did try to warn my fellow investors/SH compatriots of the impending dooms closing in, numerous times. Those that listened to my preachings back then & took proactive actions literally saved their own financial behinds. Those that didn't, well, let's just say they must be quite miserable right about now & much poorer today and probably punching themselves senseless.
Unfortunately for folks who luv pot stockes & especially those that continue to hold ANY cannabis Co, i'm BACK to offer you more, additional gloomy predictions which would put Nostradamous to shame & have him perform some truly outstanding backflips. I strongly encourage anyone that's interested in this sector to view both my previous comments on the Hexo board & my past commentary from a few years ago on several others in this sector. If you haven't done so already. It's not a prerequisite, but i stronlgy suggest you do if you intend to continue holding any financial interests in any pot companies for any prolonged amount of time beyond today.
So the big question, where is Hexo & this sector headed? First, please read my post titled "What's happening here is nothing new" on the Hexo board. It will give you a good idea where i'm coming from, some interesting perspectives and where i will continue this discussion. So in that post, i've basically outlined where the industry is at currently & it's financial health. What i will predict here is more specific and involves more around individual companies rather than the whole sector in general. Further, please note that these are MY own opinions & MY views on where i think things are headed on a micro level. So take that into consideration.
I'll first start off with cannabis stocks other than Hexo & leave Hexo for last. As i write this, there's around just under a dozen pot stocks with an enterprise value of at least $1BUS. I use enterprise value here instead of MC because it paints a more relevant & more accurate picture. As it stands now, with Curaleaf being the biggest in both enterpirse value & sales, followed closely by Trulieve in 2nd place and third place being rounded out by both Canopy & Tilray dead even. These are the big boys & control the largest market shares. The next tier group is composed of guys like Aurora, Cronus, Ayr, Sundial & maybe a few others. After this group, the drop to the next level in almost every metric, whether sales, market share & enterpirse value is quite significant & steep. In other words VERY fragmented & highly variable, not even to mention the VERY speculative micro space which is even more messed up & in worse shape but quite numerous & even more fractured.
As you can see & as i've stated previously, just too many players operating in close quarters, in a very tight market jocking for too few resources & not enough demand. The red flags warning of these problems were very evident early on, especially after regulation & oversight failed miserably. So what has to happen here is that some of the big boys like Cura have to go hunting on a speading spree to supersize OR wait it out until some of them go bankrupt. As i don't see too many or any of the well established tier one, tier two or even most of weaker tier three going under anytime soon, they have no choice but to buy thme out. Why? Because time is of the ultimate essence here, and many are running out it.
So what could pontentially happen here? I could see either Cura or Trul taking out a major company like a Weed or Tilray OR Weed & Tilray merging to compete on a more competitive level with the two top dogs. Which ever scenario plays out, one will definitely happen soon imo. The latter being the best outcome for everyone & avoiding not only anti trust & monopoly issues but might offer consumers better, cheaper product. I could really see Weed or Tilray or both shopping for potential targets soon, maybe as early as this year, if a merger between the two isn't feeseable. Two potentially sitting ducks & obvious would be both Aurora & Cronos. As they have all the ingredients both Weed & Tilray would need to get much bigger & hopefully improve their situation. Of course some of the more heavily indebted players might have to re-structuture their balance sheet before any merger or buyout is considered or attempted.
As for Hexo's fate? As i don't expect any of the main behemoths to make any intersting overtures to a company like Hexo, some smaller lower tier players might consider it
IF the conditions are right. For guys like Cura, Weed or Tilray, Hexo is just too small, too indebted & too diversified to be attractive target or enticing for them. But i could see someone like a Ayr, Hitide, Organigram & a few others picking over the carcass for some parts of the company. Especially when they restructure or spinout some divisions & after the current messy proxy battle is worked out. But for the time being though, Hexo isn't at that point yet and is really just a big a hot mess of a dumpster fire which needs major fixing & damage control. Talking about proxy battles, this brings me to the next pertinent issue & prediction.
I fully expect this ongoing conflict to persist & Mr. Arviv to continue with his raging battle campaign of revolution & re-oganization of the company from top down until he's saitisfied with the outcome. I don't beleive he will stop until almost everyone involved with the original company is outsted and put his all own people in places of control & power. Will he achieve his goal? Odds are he probably will & will most likely do it with flying colours. Just the fact he wants to instill a majority Native American element in both mgmt & bod positions AND for them to gain a bigger ownership of the company will go a long way in achieving these lofty goals. Especially in this current political & social environment and where the philosophy of this current Gov't adminstration in office in Canada adamantly welcomes these types of initatives. In other words, Mr. Arviv has every possible element on his side and i just don't see how he could possibly fail. He did succeed in having the previous Ceo being removed quite easily, so boxed checked and on to the next set of dominos to fall. After all is said & done, Hexo will be a vastly different company when guys like Mr. Arviv & team are through with it.
What do i personally think of both this initiative & outcome? Well, i've always had the philiosophy that the "best" most competent people should be put into positions of power by merit, where decision making is crucial, regardless of ANY other outside factor. Whether it's diversity or affirmative action policies, neptotism or cronyism issues or some other non logical factor. Once you begin to devle into those types of sdet agendas & put into action by dismissing other potential, more suitable options, imo you are just asking for trouble down the road. And i think it will be the case here if Mr. Arviv succeeds with what he has stated he will do. I wouldn't mind, if i was an actual investor here, if Mr. Arviv wants to overthrow & get rid of certain folks who were instrumental in a major failure of a company which caused some serious financial hardships for some. I get it. But don't make the situation worse by putting in people who might do a much worse job because they weren't qualified or vetted and done so out of pure illogical factors.
So how does this play out? Predictions. First, i think this proxy battle has to come to an end before ANYTHING else is done. Therefore, as it was the case with Mr. St louis last year, Mr .Arviv will succeed at removing most if not all the people he wants out of the company, whether mgmt or bod. This will most likely be done this year, hopefully for s/h before the summer. Secondly, after this coup is complete, i'm guessing that this new mgmt will start to implement actions to build upon what the previous outsted mgmt did. Trying to improve the books by cost cutting, increasing margins, sliming down AND lowering debt. I won't comment of the first three, but the last one, the debt issue will be crucial to anyone that's holding either debt or stock in the company. Focusing on the latter, as it's more important to anyone as a s/h and the debt holders will do what they will do. I'm going to go on a limb here and say, as i've done in the past, that the remaining $300M cdn long term debt on the books will be converted to equity some time late this year or early 2023. This will be a critical move for the company to get back on track & i see no other options if they wish to improve the balance sheet and become both competetive & profitable. Unfortunately for current s/h, this move will require & result in major diluative measures much worse than anything before it. Since it involves & needs the the support of the bond/debt holders, don't expect them to make this easy or cheap. For this reason, and predictions 3, this will most likely be done at sub 0.50 and not one cent higher. I doubt very much the debt holders will be encouraged or motivated to take anything less, as they've been collecting a lucrative ROI by holding this debt and exchanging that for equity in the company is vastly inferior. But with the prospect of looming or possible threat of BK if they don't, i think they eventually will as filing for possible CCAA will be a nightmare, expensive & take years to resolve for everyone involved.
I hope this gives anyone who had the courage to read through all that a better idea of what's going on & what's at stake. I'm not a s/h currently in this company but i've been following it along with several others for a few years. Contrary to some here & luckily for me i was never a holder. As i don't have any further interst to post additonal commentary in this sector on any other Cannabis play at this time, i will IF something interest happens. For now, i'll just stay on the sidelines on EVERY angle to see how this plays out AND if i'm eventually right on my assertions. Later folks....
GLTA