Hexo Lays Off 200 Employees, Delays Earnings

HEXO Corp. (TSX: HEXO) (NYSE: HEXO) has become the latest cannabis casualty as the company said it was laying off 200 employees following an announcement that it was delaying the release of its earnings results.

“This has been my hardest day at HEXO Corp,” said Sebastien St-Louis, CEO, and co-founder of the Company. “While it is extremely difficult to say goodbye to trusted colleagues, I am confident that we have made sound decisions to ensure the long-term viability of HEXO Corp. The actions taken this week are about rightsizing the organization to the revenue we expect to achieve in 2020.”

The company characterized the layoffs as ‘rightsizing its operations to adjust to a changing market and regulatory environment with a view towards profitability and long-term stability.’ The cuts include the elimination of some executive positions and the departures of Arno Groll, Chief Manufacturing Officer and Nick Davies, Chief Marketing Officer.

This information followed an earlier announcement that Hexo had entered into subscription agreements with a group of investors for a C$70 million private placement basis, for an 8.0% unsecured convertible debentures of Hexo. The company blamed the new financing for the reason it had to reschedule the release of its fourth quarter and full year financial results to October 28, 2019.

The group of investors included Sebastien St-Louis, CEO, and co-founder of HEXO Corp, as well as Board members Dr. Michael Munzar, Vincent Chiara, Nathalie Bourque, and Adam Miron.

“The confidence in HEXO Corp that this $70 million private placement demonstrates is a testament to the value the Company is expected to bring to shareholders,” said Sebastien St-Louis, CEO, and co-founder of HEXO Corp. “We remain focused on garnering significant market share, driving growth, and in shaping this company into a mature, resilient and valued leader in our industry.”

“It is important to note the one-year anti-dilution feature in this arrangement, meaning that the financing does not dilute current shareowners’ ownership of the Company in the short term,” added St-Louis.

The company blamed its troubles on “slower than expected store rollouts, a delay in government approval for cannabis derivative products and early signs of pricing pressure are being felt nationally. The delay in retail store openings in our major markets has meant that the access to a majority of the target customers has been limited. Additionally, regulatory uncertainty across the pan-Canadian system and jurisdictional decisions to limit the availability and types of cannabis derivative products have contributed to an increased level of unpredictability.”

Debra Borchardt

Debra BorchardtDebra Borchardt

Debra Borchardt is the CEO, Co-Founder, and Editor-In-Chief of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Masters degree in Business Journalism from New York University.


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