Marijuana producer Hexo delays earnings release, announces CA$70 million private placement

Quebec cannabis producer Hexo postponed the release of its financial results, which were expected Thursday, after announcing a plan to raise 70 million Canadian dollars ($53 million) in a private placement.

In a news release, Hexo said the delay was due to “the (private placement) financing and additional time required to finalize” its year-end filings.

Fourth-quarter and full-year results will now be released Oct. 28.

A group of investors – including CEO Sebastien St. Louis and board members Nathalie Bourque, Vincent Chiara, Adam Miron and Michael Munzar – agreed to purchase the convertible debentures, which will bear interest of 8% per year and mature in three years.

The debentures will be convertible into common shares at a price of CA$3.16 per share one year from issuance.

Hexo’s shares rose 6% to CA$2.75 per share after the announcement was made

The transaction is expected to close Nov. 15.

Hexo intends to use the proceeds for working capital.

Earlier this month, Hexo projected fourth-quarter net revenue to come in at CA$14.5 million-CA$16.5 million and net revenue for the year to be CA$46.5 million-CA$48.5 million.

“Fourth-quarter revenue is below our expectation and guidance, primarily due to lower-than-expected product sell-through,” St. Louis said at the time.

“While we are disappointed with these results, we are making significant changes to our sales and operations strategy to drive future results.”

The company blamed slower-than-expected store rollouts and a delay in government approval for edibles, extracts and topicals products.

The government, however, did not delay the approval of such products, which were never expected to be available in stores before the end of 2019.

Also on Oct. 10, the company withdrew its fiscal year 2020 outlook, which had advised investors it was “on track” to ramping up to CA$400 million in revenue.

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