HEXO Announces $70 Million Financing, Delays Q4 Earnings

$70 Million Private Placement to be Led by Company Insiders and Long-Term Investors

HEXO Will No Longer Report Q4 Earnings Tomorrow Morning

HEXO Corp. (TSX: HEXO) (NYSE-A: HEXO) announced today the company has entered into subscription agreements with its CEO, Directors and long-term investors to conduct a private placement. HEXO will look to raise $70 million via 8.0% unsecured convertible debentures.

Due to the additional time required to complete the newly announced private placement, HEXO has decided to reschedule the release of its Q4 financial results. HEXO was originally slated to post earnings tomorrow morning, but will now report on October 28, 2019. The company will hold its earnings call on Tuesday, October 29, 2019, at 8:30 am EST.

“The confidence in HEXO Corp that this $70 million private placement demonstrates is a testament to the value the Company is expected to bring to shareholders. We remain focused on garnering significant market share, driving growth, and in shaping this company into a mature, resilient and valued leader in our industry,” stated HEXO CEO Sebastien St-Louis.

The group of investors participating in the private placement includes HEXO Co-Founder and CEO Sebastien St-Louis as well as Co-Founder and Board Member Adam Miron, Chairman of the Board Dr. Michael Munzar, and Board Members Vincent Chiara and Nathalie Bourque.

Debenture Terms

8.0% per annum payable quarterly.
Maturity date: Three years from the date of issuance.
One year from the issuance date;
- The debentures become convertible at the option of the holder into common shares.
- Any time before the maturity date.
- At a conversion price of $3.16 per share.
- One-year anti-dilution feature.
- Subject to adjustment in certain events.
- The debentures and any common shares issuable upon conversion are subject to a statutory hold period of four months and one day following the closing date.

“It is important to note the one-year anti-dilution feature in this arrangement, meaning that the financing does not dilute current shareowners’ ownership of the Company in the short term,” added St-Louis.

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HEXO has reserved the right to repay the principal amount of the ‎debentures, ‎plus any accrued and unpaid interest at any time on or before the one year from the issuance date.

After one year, HEXO has the right to force the conversion of all the debentures’ outstanding principal amount at the conversion price by giving 30 days notice if the company’s daily volume-weighted average trading price of the stock is greater than $7.50 for 15 consecutive trading days.

If there is a change in control of the company, debenture holders will have the right to demand HEXO repurchase their debentures in part or whole 30 days after the change of control is announced. The repurchase price will be equal to 115% of the debentures’ principal amount plus any outstanding interest.

Under the private placement, HEXO anticipates that company insiders will buy roughly $8.68 million worth of the unsecured convertible debentures. With HEXO’s stock trading near 2018 lows, company insiders have decided to load up while the stock is cheap. The insider buys will be considered a related party transaction.

The financing is expected to close on or around November 15, 2019, and the company plans to use the money from the private placement for working capital and general corporate purposes. The deal is also subject to the usual customary closing conditions.

Q4 Earnings Webcast Details