An activist shareholder of Canadian cannabis producer Hexo Corp. is pushing to replace the majority of the company’s board, with an eye to “turning around the underachieving company’s disappointing performance.”
Adam Arviv owns approximately 2% of Hexo, according to a news release, and has been “waging a battle” with Hexo management since it acquired competing Canadian producer Redecan for 925 million Canadian dollars ($730 million) last year.
According to the release, “Arviv alleges that former chair Dr. Michael Munzar and former CEO Sebastien St. Louis deceived the Redecan group of investors and destroyed shareholder value by completing a number of destructive financings and that the incumbent board … was grossly remiss in approving these transactions.”
Arviv, the CEO of investment firm Kaos Capital, further alleged that a number of Indigenous investors in Redecan “have now lost significant net worth and feel betrayed by the mismanagement of (Hexo).”
The activist investor cited the precipitous slide in Hexo’s share price over the past year, from CA$14 to less than CA$1, and accused the current board of “a notable lack of understanding of capital markets” in its handling of Hexo’s capital needs.
Arviv plans to nominate himself and four other potential board members at a Hexo shareholder meeting in March.
Hexo said it is reviewing Arviv’s board nominations and is preparing its own board recommendations for the upcoming meeting.
The company has “welcomed an open and constructive dialogue with Mr. Arviv over the past months,” Hexo said in a statement.
“It is disappointing that Mr. Arviv has decided to proceed with this unnecessary, disruptive and expensive approach rather than continuing working with the company in a normal course.”
Former CEO St. Louis exited the company in October.
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Hexo, which reported a CA$117 million loss in its most recent quarter, has burned through several chief financial officers in recent years.
The company announced a major cost-cutting plan in January.