Insights

Why Hexo Stock Wilted So Badly This Week

What happened
Hexo (NASDAQ: HEXO) is no stranger to share price declines, and investors withstood a fresh double-digit decline in their company’s stock this week. According to S&P Global Market Intelligence, the Canadian marijuana operator’s shares fell by nearly 15% in the period, pushing the stock’s price down below $0.35 per share.
So what
The main reason Hexo took a bath is because it’s about to launch another in an ever-lengthening series of secondary stock issues. This latest model is taking the form of an at-the-market offering, under which it will selll up to $40 million in fresh common stock. This offering has a termination date of June 10, 2023; in the entirely possible scenario that that $40 million threshhold is reached earlier, it will terminate at that point.
Image source: Getty Images.

This is contributing to a growing sense among investors that by doing the share issue dance yet again, Hexo is hoping people will throw good money after bad. Even by the standards of the struggling Canadian pot industry the company is a laggard; it constantly posts bottom-line losses, and is usually cash-flow challenged.
But Hexo investors aren’t only concerned with their company’s latest dilutive capital-raising move. All in all, news from elsewhere in the marijuana industry wasn’t particularly heartening over the week.
Marijuana-specialized real estate investment trust (REIT) Innovative Industrial Properties unveiled first-quarter results that fell short of analyst profitability estimates. Retailer Green Thumb Industries also published first-quarter earnings; these indicated flat sequential growth on the top line. Investors promptly traded both stocks down following these revelations.
Now what
So if the better-reputed Innovative and Green Thumb couldn’t please investors during the week, there was little chance of serial dilutor Hexo finding favor. The Canadian company needs to deliver some good news about its business sooner rather than later to improve the lackluster sentiment on its business.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Green Thumb Industries and Innovative Industrial Properties. The Motley Fool recommends HEXO Corp. The Motley Fool has a disclosure policy. –

What happened

Hexo (NASDAQ: HEXO) is no stranger to share price declines, and investors withstood a fresh double-digit decline in their company’s stock this week. According to S&P Global Market Intelligence, the Canadian marijuana operator’s shares fell by nearly 15% in the period, pushing the stock’s price down below $0.35 per share.

So what

The main reason Hexo took a bath is because it’s about to launch another in an ever-lengthening series of secondary stock issues. This latest model is taking the form of an at-the-market offering, under which it will selll up to $40 million in fresh common stock. This offering has a termination date of June 10, 2023; in the entirely possible scenario that that $40 million threshhold is reached earlier, it will terminate at that point.

Image source: Getty Images.

This is contributing to a growing sense among investors that by doing the share issue dance yet again, Hexo is hoping people will throw good money after bad. Even by the standards of the struggling Canadian pot industry the company is a laggard; it constantly posts bottom-line losses, and is usually cash-flow challenged.

But Hexo investors aren’t only concerned with their company’s latest dilutive capital-raising move. All in all, news from elsewhere in the marijuana industry wasn’t particularly heartening over the week.

Marijuana-specialized real estate investment trust (REIT) Innovative Industrial Properties unveiled first-quarter results that fell short of analyst profitability estimates. Retailer Green Thumb Industries also published first-quarter earnings; these indicated flat sequential growth on the top line. Investors promptly traded both stocks down following these revelations.

Now what

So if the better-reputed Innovative and Green Thumb couldn’t please investors during the week, there was little chance of serial dilutor Hexo finding favor. The Canadian company needs to deliver some good news about its business sooner rather than later to improve the lackluster sentiment on its business.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Green Thumb Industries and Innovative Industrial Properties. The Motley Fool recommends HEXO Corp. The Motley Fool has a disclosure policy.

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