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Quebec licensed producer Hexo Corp. slashed its workforce Thursday afternoon, cutting 200 jobs across all departments and locations, including the elimination of certain executive positions.
Hexo’s stock dropped six per cent following news of the cuts, erasing a similar gain it had made on Wednesday following news of a $70 million private placement raise, led by the company’s CEO, Sebastien St-Louis.
“This has been my hardest day at Hexo Corp.,” said St-Louis. “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. The actions taken this week are about right-sizing the organization to the revenue we expect to achieve in 2020.”
Amongst the executives who lost their jobs at Hexo were chief manufacturing officer Arno Groll and chief marketing officer Nick Davies.
As of April 30, 2019, the company employed 822 people. Hexo added another 250 employees through the acquisition of licensed producer Newstrike Brands Ltd. The company also has a joint venture with Molson Coors called Truss Beverage Co., which produces cannabis-infused drinks. It is unclear how many jobs directly related to Truss’ and Newstrike’s operations were part of the job cuts. Both companies did not immediately respond to the Post’s requests.
The Gatineau, Que.-based licensed producer has seen its stock price erode over the past few weeks, since announcing a negative revision to its upcoming revenue forecasts — the company had targeted $26 million in sales for the quarter ending July 31, but cut that forecast by about 40 per cent to $14.5 million.
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In addition to the $70 million raise, Hexo also announced Wednesday it would delay its earnings release, which had been expected Oct. 24, to Oct. 28.
CIBC’s cannabis analyst, John Zamparo, expressed concern over the necessity of the raise, given Hexo’s fairly healthy cash position. “We are surprised at this decision… We project Hexo would not encounter potential capital shortfalls until mid-2022,” Zamparo wrote in a note to clients Thursday morning.
He also questioned the timing of the raise, pointing out the capital constraint in the cannabis industry over the past few months. “Hexo’s stock is near 52-week lows following its withdrawal of F2020 revenue guidance and a significant reduction to FQ419 guidance. The decision to raise equity in these conditions is curious.”