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Is HEXO Running Out of Money?


HEXO (NYSE: HEXO) has had a rough year, to put it lightly. Between releasing disappointing sales numbers, pulling its forecast for fiscal 2020, and watching its CFO resign after less than a year on the job, the company has seen its share of bad press over the past 12 months. HEXO's biggest problem, though, could be related to cash flow, and there's growing evidence that it may be running low on its most important and most liquid asset.

On Dec. 26, HEXO's stock plummeted 22% when investors learned the company would be issuing 15 million additional shares in order to raise $25 million. That meant the offering price would be just $1.67 per share, well below the $1.96 at which HEXO's stock closed the previous day. In addition, 7.5 million warrants would be available for investors to purchase at $2.45 per share. The warrants are available to be exercised over a five-year term.

That was bad news for investors, as the share issue would dilute existing shareholders of the company, effectively devaluing the stock. Typically, companies prefer to issue shares when the stock is high and they can obtain a higher offering price. That wasn't the case with HEXO. Prior to the announcement, its shares had declined 43% since the beginning of the year, performing even worse than the Horizons Marijuana Life Sciences ETF, which was down around 36% over the same period.

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Source Fool.com

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