Hexo Corp Is Setting Up An At-The-Market Offering

Hexo Corp (TSX: HEXO) (NYSE: HEXO) held its conference call for its first quarter 2020 financials this morning. Within, the firm announced that it will be the latest company to conduct an at-the-market, or ATM financing within the cannabis space. They follow in the footsteps of firms such as Cresco Labs and Organigram who have been desperate for cash as of late.

Details were thin on the financing, with the firm only indicating that the size of the at-the-market offering will be 10% of the firms market cap in the prior month. Given the pricing of the equity over the last several weeks, that figure represents approximately $70 million in additional funds for the company while further diluting long term shareholders.

The news of the additional financing follows last weeks announcement of Hexo closing a heavily dilutive $70 million debenture financing, where the conversion price at time of maturity is simply based on the five day volume weighted average price – meaning there is no floor on the equities pricing effectively, and a large known future overhang.

Despite closing the last quarter off with $73.5 million in the form of cash, cash equivalents, and short term investments, followed by a $70 million raise, Hexo identified on today’s conference call that the firm currently has a combined cash position of approximately $90 million, demonstrating the need for the at-the-market offering as well as further likely financings in the future.

Hexo Corp last traded at $2.91 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.