Risking delisting from the Nasdaq because the value of its shares is too low, the Quebec cannabis producer and main supplier of the Quebec Cannabis Society, Hexo, wants to boost the value of these by reducing the number of shares outstanding .
The Gatineau company is proposing to its shareholders a share consolidation, a strategic operation that has the effect of reducing the number of shares in circulation and, as a result, increasing their value. The value of the company otherwise remains unchanged.
Management communicated its proposal in a circular intended for shareholders, who will also have to vote on it at an annual and extraordinary meeting to be held on March 8.
If Hexo fails to increase the value of its shares above a dollar, the largest cannabis supplier to the Quebec Cannabis Society could be delisted from the Nasdaq by the end of July.
In January, New York’s Nasdaq Stock Market issued a notice to Hexo that its shares were below the allowable threshold. Under Nasdaq rules, common stocks of companies must maintain a price of at least US$1.00. For nearly a year, Hexo’s stock has fallen 93% from $10.28 to $0.65.
A delisting from the Nasdaq would have financial consequences for the company. To trade these shares, securities dealers would have to pay additional fees which could “discourage them from trading in the common shares, which could further reduce the liquidity of the common shares”, reads the circular. .
In addition, delisting from the Nasdaq “could impair the ability [d’Hexo] to raise equity financing, when needed.
Accumulating deficits for years, Hexo took steps with the Ministry of the Economy this fall to obtain a stake from Quebec in the capital stock of the company. In the registry of lobbyists, the company indicates that the financial support would “accelerate the company’s innovation program and consolidate jobs at the head office”.