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HEXO Closes $20M Share Issue That Tanked Stock

By Eric Volkman - Jan 23, 2020 at 8:06AM

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Investors are concerned that the company is resorting frequently to stock flotations to raise capital.

HEXO (HEXO -5.11%) has concluded its latest round of financing, the cannabis company announced after market hours on Thursday.

In a registered direct offering that was announced late last week, the company sold just under 12 million shares at a price of $1.67 per share. In the sale, HEXO also distributed warrants bearing the right to purchase almost 6 million shares of its stock. The warrants' exercise price is $2.45 per share, and they have a five-year term. All told, the company took in $20 million of gross proceeds with the issue.

Hand holding a marijuana cigarette.

Image source: Getty Images

When originally announcing the current share and warrant issue, HEXO said it would use the money derived from it for "for working capital and other general corporate purposes, including funding the Company's research and development to further advance the Company's innovation strategies." It did not get more specific, including how much it would allocate to those research and development activities.

The market did not receive this warmly. HEXO's stock closed 9% lower on the day the original announcement was made. Since then, its price has sunk further.

Share dilution is a major concern among marijuana stock investors, as companies in the sector have frequently resorted to selling fresh shares in order to raise capital. HEXO has done this several times in its relatively short life as a publicly traded company; in fact, prior to this share and warrant issue, HEXO floated another less than a month ago that raised $25 million.

In just over two years, its share count has tripled and then some.

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