Hexo Corp., a cannabis producer based in Gatineau, Canada hopes to list on the NYSE in December. Listing on the NYSE makes it easier for institutional money – Mutual funds, Pension funds and other large investors – to buy stocks.
Accordingly, top cannabis-related companies are eager to list there. Once thought to be the ticket to liquidity, a U.S. listing isn’t a sure thing for Cannabis companies these days. Canopy Growth Corp., and Aurora Cannabis Inc. listed shares on the New York Stock Exchange (NYSE). While many predicted the move would bring a healthy uptick in share price, it hasn’t shielded those companies from recent the sell-off.
Hexo also recently ramped up takeover-target talks with food and cosmetics company partnerships. It seems they are hoping not just for institutional investment, but for a suitor to take them out. But at what price would they sell?
“It’s certain that if someone comes and offers a 150 percent premium tomorrow, we are for sale,” said St-Louis. Mr. St-Louis co-founded the company 5 years ago. Resultingly he has a stake in Hexo of almost 2 percent.
“It should help tell Hexo’s story as one of the world’s biggest cannabis products makers,” according to CEO Sebastien St-Louis in conversation with Canada’s Financial Post. “In five years there may be four global cannabis companies and whether Hexo is a buyer or a seller on that journey, what matters to us is for our shareholders to participate in that to become one of the four.”
Supply contract with Quebec
While the company’s CAD $1.1 billion valuation is roughly ten times smaller than rivals Canopy and Tilray Inc., it has the potential to sprout up in value.
Indeed, Hexo has a supply contract with Canada’s second-most populous province. That contract’s valued at about C$1 billion, and gives the company roughly a third of the legal recreational market.
JV agreement with Molson
Moreover, it recently signed a joint venture agreement with Molson Coors Brewing Co. to bring pot-infused beverages to market. Because of those two deals, some are calling the stock significantly undervalued.
St-Louis hedged his comments with a very broad time frame. He said a sale could happen “next month or in 10 years.”
Meanwhile, he plans to sign more joint venture (JV) agreements. Indeed, those agreements could lead to a future Hexo acquisition by a JV partner.
Furthermore, the company is looking to add patents on cannabis-infused products that would make the company more attractive.
“If we keep innovating and adding better products, better ways to consume cannabis without smoking, that intellectual property will keep increasing our value,” he said. “At some point, whether it comes from one of these partners, or from another cannabis company, it’s bound to happen that Hexo will consider an offer.”