What happened
The stock of Canadian cannabis company Hexo (HEXO) popped Friday on news of two leadership changes. Shares moved as much as 7.5% higher before settling to a gain of 3% as of 2:25 p.m. ET.
So what
Investors were cheering news that Hexo is taking another step on a path it hopes will lead it to profitability. The company is replacing top leadership in both its CEO and CFO roles. The moves come as the company continues a previously announced strategic plan that it expects to help make its operations cash flow positive by early 2023.
Image source: Getty Images.
Now what
Hexo initiated a new strategic transformation in December 2021, after its fiscal 2022 first quarter. At that time it said it expected to become cash flow positive within another four quarters. That timeline was pushed back three months when it reported its next quarterly update in March 2022.
Today, the company said CEO Scott Cooper, who has been leading that strategic transformation, is stepping down. He will be replaced by Charlie Bowman in a temporary capacity until the successful completion of Health Canada's security clearance process for key personnel. That process has been initiated, as well as for Julius Ivancsits, who will replace the existing CFO.
Hexo has been shuttering facilities to streamline its operations and reduce costs in its bid to become cash flow positive. It has also strengthened it balance sheet through a partnership with Canadian peer Tilray, with Tilray acquiring up to $211 million of senior secured convertible notes.
Hexo shares have dropped almost 94% in the past 12 months. Investors who have held on likely feel like there is not much left to lose. A change in two of the top leadership roles for the company is welcome news, based on today's stock reaction.
