Is A Tilray Buyout The Only Way For Hexo Corp. To Avoid A Disastrous Split?

Although Sundial Growers (Nasdaq: SNDL) had to conduct a reverse stock split to remain listed on the Nasdaq, HEXO Corp. (Nasdaq: HEXO) (TSX: HEXO) received a 180-day extension to comply with the exchange’s minimum bid price requirement to continue to be listed on the Nasdaq Capital Market.

Off the bat, it may look like HEXO is receiving special treatment from the Nasdaq but appearances can be deceiving. During the last year, HEXO’s management team has done what it takes to remain listed on the Nasdaq. From conducting a reverse split to forming a strategic partnership with Tilray Brands Inc. (Nasdaq: TLRY) (TSX: TLRY), we believe the management team has provided the company with the chance for a comeback.

While we believe it will be nearly impossible for HEXO to regain the momentum it once had, the extension from the Nasdaq provides the Canadian Licensed Producer (LP) with enough of a runway to give the management team a chance at a comeback.

According to the Nasdaq, the decision to extend the minimum bid price requirement for HEXO was based on the company meeting the continued listing requirement based on the market value of publicly held shares. The exchange said that HEXO satisfies all other applicable requirements for initial listing except for the bid price requirement.

HEXO told the exchange it would complete a reverse stock split (again) if that is what is needed to satisfy the bid price requirement. We are not surprised by this possibility and believe it is only a matter of time until a reverse split is announced. HEXO’s management team considers the Nasdaq listing to be a core pillar of its growth strategy and we will monitor how the story evolves in the back half of the year.

During the last year, HEXO has been under considerable pressure and momentum has primarily trended toward oversold levels. We continue to be cautiously optimistic with the Canadian cannabis sector and prefer other operators to HEXO.

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