Hexo corp. (NYSE: HEXO) began trading on the NYSE effective at the open of markets on July 16, 2019, and the stock’s future could be promising for a few reasons. (The stock is transfer the listing of its common shares from the NYSE American LLC (the “NYSE-A”))
Even though Hexo’s stock hit a rough patch a couple months ago, some good news could be on the horizon for them. And after a tough earnings report, they could use it.
Getting listed on the NYSE is good for cannabis
Getting listed on the top exchange is a big deal for any publicly traded company. And for this stock, it gives them the one thing that everyone in the cannabis industry yearns for: credibility.
It’s no easy feat to become publicly traded on the NYSE. Company financials are vetted in order to prove viability. And throughout the years we’ve seen the NYSE delist numerous companies that did not meet their standards.
Hexo must be doing something right for them to measure up to the NYSE’s requirements.
Hexo is about to join an elite circle
Hexo is about to join the big boys’ club with Canopy Growth (NYSE:CGC) and Aurora Cannabis (NYSE:ACB).
And the recent shake ups with competitors Canopy Growth’s (CGC) and CannTrust (CTST) could spell more good news for Hexo.
Canopy reported an adjusted EBITDA loss for the March quarter. Plus, the CEO’s firing at the end of the June quarter suggests another poor earnings report could be coming.
The implications of the firing are that Constellation Brands (STZ) doesn’t want Canopy Growth to aggressively build up production capabilities at the cost of margins. It’s possible they’ll announce a reign in production growth in the upcoming months.
And then there’s the CannTrust’s failed audit with Health Canada. After getting busted for growing in unlicensed rooms, the company has 12,700 kg of dried cannabis held for further inspection.
Making CannTrust’s situation worse, some of the unlicensed batches cannabis oil were sold in Denmark, potentially stacking up more penalties for the company. CannTrust had plans for 75,000 kg of outdoor cannabis this year that won’t be hitting the market now.
Long story short: HEXO has two competitors that aren’t as aggressive anymore.
What it means for Hexo
HEXO has sold off to $5 following an anemic quarterly report, but the company is on track to reach C$400 million in FY20 sales that ends next June. Having both Canopy Growth and CannTrust in disarray helps the pricing power that HEXO needs in order to reach their aggressive revenue target.
Also, HEXO’s acquisition of Newstrike Brands should ramp up annual production capacity to 150,000 kg. HEXO only harvested 9,804 kg the last quarter, giving them an opportunity to triple their quarterly supply.
An important factor here is that the company isn’t getting sloppy in order to reach aggressive production targets like CannTrust.
Their additional foray into CBD extraction from 200,000 kg of hemp supply in 2020 puts them in a strong position to enter the U.S. market while balancing Canadian growth.
“We are extremely pleased to list on the NYSE and believe it reaffirms HEXO’s strong track-record for exceptional corporate governance and is further proof that we are a valuable cannabis industry partner for Fortune 500 companies,” says CEO/co-founder Sebastien St-Louis.
“HEXO is well-positioned to support consumer packaged goods companies looking to enter the space given our success in the industry, our established infrastructure including a manufacturing centre of excellence in Ontario, Canada, our technology to support mass-scale extraction and processing of advanced cannabis products, and our regulatory expertise.”
HEXO Corp is a CPG cannabis company that develops and distributes products to serve the global cannabis market. They’ve partnered with Fortune 500 companies, bringing cannabinoid isolation technology, licensed infrastructure and regulatory expertise to established companies, leveraging their distribution networks and capacity.
HEXO Corp operates 2.4 million sq. ft. of facilities in Ontario and Quebec, making them one of the largest licensed cannabis companies in Canada. They’re also expanding internationally. They serve the Canadian recreational markets under the brand names HEXO Cannabis and Up Cannabis brands, and the medical market as HEXO medical cannabis.
HEXO’s shares will trade on the NYSE under the ticker symbol “HEXO”, the same symbol the company uses on the NYSE-A, as well as the Toronto Stock Exchange (the “TSX”). HEXO’s shares will continue trading on the TSX under the same symbol.
In connection with its listing of common shares on the NYSE, Hexo will voluntarily delist its common shares from the NYSE-A.
About the Author
Eric Bowler is an accomplished journalist providing in-depth insights for more than two decades. Over the past several years his focus has been on the marijuana industry, with a special interest in cannabis growth stocks. His daily coverage of the industry keeps him on top of the key trends with the goal of helping investors make well-informed decisions.
HEXO shares rose $0.02 (+0.40%) in after-hours trading Tuesday. Year-to-date, HEXO has gained 46.65%, versus a 21.04% rise in the benchmark S&P 500 index during the same period.
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