Just when you thought things couldn't get any wilder for cannabis stocks, it does.

Following a miserable 2019 that saw the North American marijuana industry succumb to a combination of supply issues (both shortages and bottlenecks), high tax rates, and a resilient black market that is unwilling to give up market share, 2020 has begun with a number of key management changes. Within just the past two weeks, two CEOs of brand-name pot stocks have headed for the exit.

An up-close view of a flowering cannabis plant.

Image source: Getty Images.

Two brand-name pot stock CEOs are now gone

It began on Jan. 31, when MedMen Enterprises (MMNFF) CEO and co-founder Adam Bierman announced that he'd be stepping down. This was a move that was considered long overdue by Wall Street and shareholders, with MedMen's valuation having plunged by well over 90% since October 2018.

Although the vertically integrated multistate operator has offered glimpses of success, such as its longest-operating Southern California locations, which have rivaled Apple stores in terms of sales per square foot, MedMen's overzealous expansion efforts have led to ballooning operating expenses and unsustainable losses. In fiscal 2019, MedMen wound up losing almost $232 million on an operating basis -- and that was after a 30% reduction in selling, general, and administrative expenses between the beginning and end of the fiscal year.

MedMen is also facing a serious cash crunch. The company recently admitted to attempting to pay off its vendors with its own common stock. This comes after management noted that the final $115 million in financing of the up to $280 million pledged from private equity firm Gotham Green Partners is no longer accessible. It was definitely time for Bierman to step aside.

Next, on Feb. 6, we witnessed Aurora Cannabis (ACB 3.26%) CEO Terry Booth announce his plans to step down and retire. The most popular pot stock may not be in dire straits like MedMen, but its share price has declined by well over 80% since mid-March 2019.

An illuminated exit sign above a doorway.

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Booth led an aggressive campaign that saw Aurora Cannabis snatch up more than a dozen companies over a three-year stretch and become a leader in both peak estimated output and international presence. However, with supply issues rearing their head in Canada, Aurora is having to backpedal on its expansion plans at a breakneck pace. It's idled construction at both Aurora Sun in Alberta and Aurora Nordic 2 in Denmark, intends to sell its Exeter greenhouse, and announced plans to take major property & plant equipment and goodwill writedowns.

There are also genuine concerns that Aurora's overextended balance sheet may not be able to recover from its overzealous spending. Even with its debt covenants now restructured, achieving positive EBITDA by fiscal Q1 2021 is no guarantee. Booth's departure is something Aurora Cannabis (and its shareholders) definitely needed.

This marijuana stock CEO should be next to step down

With all of this being said, there's one more brand-name cannabis stock CEO who needs to go: HEXO's (HEXO) Sebastien St-Louis.

My opinion of St-Louis's performance as CEO isn't nearly as harsh as that of Booth or Bierman. HEXO wasn't exactly spending at a frivolous pace, although it likely overpaid for its Newstrike Brands acquisition in 2019. HEXO also made a number of impressive deals, including a joint venture with Molson Coors Brewing (known as Truss) to develop cannabis-infused beverages.

Two rows of dried cannabis lying atop neatly arranged one hundred dollar bills.

Image source: Getty Images.

But as MKM Partners' analyst Bill Kirk recently noted when downgrading HEXO and slashing his firm's price target on the company by 70%, HEXO's management is notorious for making positive statements that never come to fruition. Said Kirk in the note released to clients, "Of 104 positive predictions made by HEXO over the last two years, just 3 of 48 resolved were correct." It's this inability to follow through and build trust with investors that has me believing St-Louis needs to go.

Additionally, there are other problems. Financing, for one, is a pretty sizable short- and long-term concern for HEXO. Through a combination of stock issuances and convertible note offerings, the company raised about 100 million Canadian dollars (about $75.2 million U.S.) since October. But this may not prove to be enough, with HEXO continuing to lose money, traditional forms of financing essentially closed off, and St-Louis proclaiming in the company's most recent conference call that 20% market share would be needed throughout Canada to be profitable. Here's a news flash: No cannabis grower is anywhere near 20% market share throughout Canada, let alone HEXO.

As noted, HEXO is also nowhere near profitability, despite getting very aggressive on the cost-cutting front. It has completely idled the Niagara facility, acquired with the Newstrike Brands purchase, as well as 200,000 square feet of its flagship Gatineau facility. I suspect this takes about a third of HEXO's 150,000 kilos of peak annual output offline, for the time being. HEXO also shed 200 jobs from a variety of departments.

Put plainly, St-Louis has lost the confidence of shareholders, and his departure would be a stepping stone to, hopefully, rebuilding faith with investors.