Hexo Corp (TSX: HEXO) (NYSE: HEXO) needs money in a bad way. The problem, it seems, is they don’t even know how much they’ll be able to raise given the performance of the equity as of late. The company announced this morning that it has proposed a public offering of units, however Canaccord Genuity, the lead underwriter on the financing, hasn’t even provided the company with an estimate of how much it can expect to raise.
With Hexo Corp currently in a bad way right now, the company elected to go ahead with the announcement that it is conducting a public offering. However, none of the terms are currently set – the final price per unit, nor timeline, nor total funding size has been finalized yet. To that end, the company has resorted to indicating that it will be “priced in context of the market.”
Update: Shortly after publishing, Hexo issued a second news release indicating that they would be raising $40 million through the issuance of 52 million units. Each unit, priced at $0.77 each, comes with one common share and one common share purchase warrant with an expiry of five years from the time of issuance. The exercise price on the warrant is $0.96, which is notably yesterday’s closing price for the equity on the TSX. The company expects to close the offering April 13.
The only thing the company is certain on, is that a 30-day over allotment option will be offered to the underwriters, to raise up to an additional 15% of the unknown offering size. Funds raised from the financing will be put towards working capital and general corporate purposes.
This morning’s announcement follows the disclosure by the company last Monday that due to certain debt covenants on an outstanding CIBC and BMO credit facility, the company had to announce an equity raise of at least $15.0 million by April 10. In total, Hexo must find at minimum $40 million by April 30, either through an equity raise or an at-the-market offering, to come into compliance with the current facility or risk defaulting on the debt.
Hexo Corp last traded at $0.96 on the TSX.
Information for this briefing was found via Sedar and Hexo Corp. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
