Hexo Sees Equity Free Fall After US$25 Million Financing

Hexo Corp (TSX: HEXO) (NYSE: HEXO) shares fell sharply in today’s session due in large part to an early morning news release announcing the firm would be conducting a US$25 million direct offering of units. While Canadian markets remained closed for Boxing Day, US markets were open, wherein the Quebec-based grower saw its equity fall 21.94% to US$1.53 US.

This mornings announcement identified that the cannabis cultivator will be issuing 14,970,062 common shares as it raises US$25 million in gross proceeds via a direct offering to US-based investors. Each unit, priced at US$1.67 also comes with a half warrant with an exercise price of US$2.45 per share and a lengthy expiring of five years.

The financing will see the equities common shares increase by approximately 5.8% before warrants are taken into consideration.

The offering, which is expected to close by December 30, 2019, will see proceeds put towards working capital and other general corporate purposes, which is evidently to include research and development.

The announcement of a further financing follows the lengthy C$70 million convertible debenture financing which closed on December 6, following its announcement back in October. Despite closing less than 30 days ago, that financing consists of an early conversion price that is 44% higher than the per share price on this latest round of financing. Furthermore, the company announced on last weeks conference call that they would be conducting an at-the-market (ATM) financing for up to 10% of its current market cap, identifying that the firm is essentially burning through cash at a high pace.

Today’s financing was at a 14.7% discount to the previous close of the equity.

Hexo Corp last traded at $1.53 on the New York Stock Exchange.

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.