HEXO Corporation (HEXO.TO) (HEXO) has been one of the biggest turnaround stories of the year and many analysts expect 2021 to be a period of strong growth for the Canadian Licensed Producer (LP).
The last few quarters have been significant for HEXO and we believe its relationship with Molson Coors (TAP) (TAP.CN) will serve as a key growth pillar over the long-term. Earlier this year, the companies formed Truss Beverages to capitalize on the cannabis beverage market. Through Truss Beverages, HEXO and Molson are selling THC infused beverages in Canada and CBD infused beverages in the US. Going forward, we expect Truss Beverages to serve as a major growth driver for HEXO and will monitor how this aspect of the story advances in 2021.
Another key pillar of story is related to how HEXO is positioned to capitalize on burgeoning international cannabis markets. We are of the opinion that HEXO’s leverage to the Israeli medical cannabis market (via a strategic relationship with Breath of Life) was a secondary reason for the stock’s performance and are bullish on this relationship. We believe the company’s leverage to Israel represent a major potential growth driver and will be closely monitoring this aspect of the story in 2021.
The market has responded favorably to the recent developments and the shares have rallied more than 60% since the November general election. The stock has rallied almost 200% off its 52-week lows and the recent performance has impacted the management team’s decision to conduct a reverse stock split.
According to the New York Stock Exchange’s (NYSE) listing standards, a company must be trading above $4 to be able to list on the exchange. The NYSE also requires companies to trade above the $1 to remain listed on it.
A reverse split has been in HEXO’s future for a long-time and the exchange recently told the company that it needed to conduct one. Following the recent rally, HEXO’s management team is working on changing the terms of a planned reverse stock split. The company plans to vote on an amendment for a 4 for 1 reverse split. Previously, the company planned to conduct an 8 for 1 split and we will monitor how the company continues to perform.
Going forward, we believe that the success of HEXO is solely based on Truss Beverages. Molson Coors offers the company credibility and expect this to play an important role in the success of the brand. If you are interested in learning more about HEXO or Truss Beverages, please send an email to firstname.lastname@example.org with the subject “HEXO Corp” to be added to our distribution list.