HEXO Admits To Growing Cannabis In Unlicensed Room

Canadian cannabis producer Hexo Corp. (HEXO) has admitted to unknowingly growing cannabis in an unlicensed area of its Niagra facility. 

The company put out a press release on Friday saying that a section of the facility found to be growing cannabis was not properly licensed to do so. The unlicensed section is referred to as “Block B” and was acquired from Newstrike Brands earlier this year. 

On July 30th, shortly after the acquisition closed, is when Hexo said they discovered the unlicensed growing taking place. Hexo explained that when UP Cannabis received its cultivation license for Niagra, it was under the impression that Block B was included in the license. Hexo’s facility, including Block B, was even inspected by Health Canada in February 2019 and no concerns were raised about unlicensed growing within the facility. Only upon acquisition did Hexo learn that Block B was not licensed to grow cannabis. 

Hexo CEO and co-founder, Sebastien St-Louis, said “Upon discovering that cannabis was being grown in an inadequately licensed area of the Niagara facility we immediately ceased all activities and notified Health Canada. While we are disappointed with what we uncovered, we assume responsibility for any issues with UP products prior to the acquisition.” Health Canada says they are satisfied with how the company handled the situation. 

Earlier this year another Canadian cannabis company, CannTrust, came under fire for unlicensed growing operations. However, these two situations are vastly different as evidence shows that CannTrust knew about their unlicensed growing, yet did nothing to stop it. In fact, emails showed the company’s compliance officer saying they “dodged some bullets” after an inspection at the facility failed to uncover the unlicensed growing taking place. CannTrust also had to destroy $77 million worth of unregulated plants and they fired its CEO. On the other hand, Hexo seems to be handling the entire situation honorably. 

The market is also seeming to make this distinction, while the stock fell on Friday and Monday, it was trading higher on Tuesday. The stock was lately trading at $1.74.

Sebastien St-Louis says that “Hexo is keenly focused on producing high-quality products that Canadians can trust.” The company says there are no current operations happening at the Niagara facility and UP Cannabis cultivation has been moved to their other locations. This is not due to the recent events. but an overall operations move. 

Kaitlin Domangue

Kaitlin is a 23-year-old wife and mom to three children. She is a financial reporter for the Green Market Report and a freelance writer for other businesses in the cannabis space.

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