Cannabis stocks are continuing to struggle financially, with some of the sector’s most promising stocks failing to live up to the earlier hype surrounding them. HEXO Corp (NYSE: HEXO) is one of those companies.
A major cannabis producer that many experts had anticipated would become one of the top marijuana producers in Canada, HEXO quickly disappointed investors with a series of poor financial results. Since then, the stock has steadily plummeted. On Thursday, HEXO warned investors that further declines are on the horizon and that they are laying off 200 employees.
HEXO’s downsizing is a worrying sign, as cannabis companies should still be seeing increases in revenues at this point. However, the falling price-per-gram for retail cannabis has led to companies struggling to operate profitably. At the same time, the announcement also provided preliminary Q4 2019 financial results which weren’t particularly impressive. Key figures include a slowdown in retail store openings, continued delays in government approval for CBD derivative products, as well as the ongoing price pressure adversely impacting the company’s financials.
Overall, HEXO is cutting down 200 full-time positions across all its departments. Some of these include executive positions, include Chief Manufacturing Officer Arno Groll and Chief Marketing Officer Nicke Davies. Earlier in October, HEXO’s Chief Financial Officer Michael Monahan also resigned from his role, although he cited family reasons as the reason. Before this firing round, HEXO had 822 employees, so the loss of 200 jobs represents at least 25% of the company’s workforce.
“This has been my hardest day at HEXO Corp,” said Sebastien St-Louis, CEO and co-founder of HEXO Corp in an official press release. “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.”
Shares of HEXO ended up falling by 8.7% over the course of Thursday as well as in after-hours trading. Over the past six months, shares of this Canadian cannabis giant have seen it’s market cap fall drastically by over 70%. Like most other cannabis companies, HEXO’s decline has followed the overall decline in the industry, although HEXO’s fall from grace has been particularly tough considering how promising that company used to be.
Now it seems that its financial problems are here to stay. Investors will watch out for the full financial figures which will be released on October 28th, 2019. This could be a good opportunity to short the stock for speculators who are bearish on the cannabis market as a whole.
HEXO Company Profile
HEXO Corp is a consumer packaged goods cannabis company that creates and distributes innovative, easy-to-use and easy-to-understand products to serve the Canadian cannabis market. The company serves adult-use market under the HEXO brand, while continuing to serve its medical cannabis clients through the well-known Hydropothecary brand. The company offers dried cannabis; Elixir, a cannabis oil sublingual mist product line; and Decarb, an activated fine-milled cannabis powder product. – Warrior Trading News
