Investors managed to withstand a new double-digit decrease in the price of Hexo’s shares this week, despite the company’s history of share price losses (HEXO 14.05%). S&P Global Market Intelligence reports that throughout the time period, shares of the Canadian marijuana business operator decreased by about 15%, driving the stock price below $0.35 per share.
Hexo lost a lot of money mostly because it is going to begin another in a never-ending string of secondary stock offerings. Using the most recent model, it will sell up to $40 million in new common stock in an at-the-market offering. This offering has an expiration date of June 10, 2023; if the $40 million threshold is met sooner than that date (which is totally feasible), the offering will end at that time.
Investors are beginning to believe that Hexo is trying to throw good money after bad by doing the share issuance dance again. The firm is a laggard even by the standards of the troubled Canadian marijuana market; it consistently produces bottom-line losses and frequently struggles with cash flow.
Investors at Hexo, however, are not just worried about their company’s most recent, dilution-causing capital-raising activity. Overall, the marijuana business news during the last week wasn’t very encouraging.
Innovative Industrial Properties, a marijuana-focused real estate investment trust (REIT), released first-quarter earnings that fell short of profitability projections from analysts. Retailer Green Thumb Industries also released first-quarter financial results, showing flat top-line sequential growth. Investors immediately sold both equities after these developments.
Therefore, there was little possibility of serial dilutor Hexo winning over investors if the more reputable Innovative and Green Thumb couldn’t do so throughout the week. To change the negative perception of its firm, the Canadian corporation must offer some positive news regarding its operations as quickly as possible.
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