Hexo Announces US$40 Million ATM Financing, Has Less Than Two Months Cash Remaining

Hexo Corp (TSX: HEXO) is looking to dilute its current shareholders once again. The firm this morning announced the launch of a new at the market offering to raise further funds for its operations.

The new ATM offering is pegged at US$40.0 million, with shares under the program to be sold on both the Toronto Stock Exchange as well as Nasdaq Capital Markets. The financing follows a similar program conducted last year, with that ATM pegged at C$150 million. That offering was terminated as of April 11, 2022, so as to enable the company to proceed with the current offering.

This latest financing is to be conducted via Canaccord Genuity. The previous offering comparatively was conducted through Alliance Global Partners and BMO Capital Markets.

Proceeds from the offering are to be used for working capital and funding its operations. Any proceeds from the financing beyond US$30 million are reportedly to be used to pay Tilray Brand’s (TSX: TLRY) financial advisor in relation to the transaction agreement whereby the firm is to buy certain outstanding debt of Hexo’s.

Notably, within the related prospectus filing made this morning, Hexo identified that its non-restricted cash position has declined from $37.7 million as of January 31 to that of just $14.1 million as of April 29. The result is that the company currently has less than two months of cash burn remaining in company coffers, and is a far cry from the US$100 million required to be available for the closing of the transaction with Tilray Brands.

The additional dilution to the company also comes at a time when its Nasdaq listing is in jeopardy for not maintaining minimum listing standards on the exchange in relation to the price of the equity. The company is currently proposing up to a fourteen to one reverse split to meet these standards, however an ATM financing appears to work against these goals.

The news follows the announcement last week that the firm would be replacing its CEO after just six months on the job.

Hexo Corp last traded at $0.51 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.

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