World News – CA – The best news for HEXO stock investors this Christmas

December 24, 2020

The Colorful Fool Canada »Cannabis Stocks» The Best News for HEXO Stock Investors This Christmas

Brian Paradza, CFA | 23 December 2020 | More about: HEXO HEXO

Shortly after the marijuana company opened on Jan. After undertaking a revised stock consolidation on Dec. December had published a more reassuring press release

The latest news is that the cannabis breeder is about to expire its base prospectus this month. Investors in HEXO shares can welcome the news for two solid and bullish reasons. First, the company has stopped diluting its shareholders Second, management is confident it will that the cash burn is suppressed and the future profitability prospects exist

In December 2018, the company filed a prospectus to raise new equity financing of up to € 800 million over a period of 25 months between November 2018 and December 2020 USD to include

HEXO used just under a third of the planned capital raising capacity. The company raised only $ 254 million between January 2019 and August 2020. After a successful turnaround strategy, “the company has decided not to submit another short-form basic shelf prospectus at this time,” says it in the latest press release

The company once flirted with the possibility of bankruptcy Lenders gave management a deadline to raise new equity The share price was in free fall and there was no guarantee that markets would continue to fund the company Fortunately, funding was secured just in time

Management sees no more need for new and dilutive equity financing, at least not in the short term The management team sees the balance sheet and cash flow prospects of the company positively As already mentioned, the numbers come exactly to HEXO

As early as 2019, management noticed a growing oversupply of marijuana in the Canadian market than comparable companies It was decided to stop further investments in operating and expansion projects The company ceased operations at selected production sites, sold some and laid off several employees, to downsize operations taking into account market conditions

Revenue continues to grow while operating costs remain limited Cash flow from operations has improved over the course of 2020 as the company reported progressively better Adjusted EBITDA numbers for six consecutive quarters that we saw the Free cash flow generation has improved sequentially in five quarters

HEXO net sales grow quarterly and free cash flow improves sequentially Source: Koyfin

The company has made tremendous strides in positioning its brands in Canada. The company signed international supply agreements and launched new, successful products, while maintaining market leadership in Quebec

Analysts assume that HEXO will report its first positive cash flow from operating activities in the third quarter of fiscal year 2021.The first positive adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) will also be reported for the 31 The second quarter of the 2021 financial year is expected to end on January next year

“We’re also on track to generate positive cash flow from our operations,” said Trent MacDonald, CFO of HEXO, in the press release dated Jan. December “In view of our solid financial position and in particular our excellent liquidity and cash flow position, we see no need to carry out further financing rounds in the near future,” he concluded

Investors notice HEXO’s concrete progress in 2020 The numbers look much better and the outlook is encouraging However, the share price has not reacted much yet

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