Anyone with interest in the cannabis sector, or who has some skin in the game, knows that it can be a full-time job to keep up with the endless news flow on the many companies. In fact, to dive right in, perhaps even the most religious followers of the marijuana industry might not know that Canadian cannabis producer HEXO Corp (HEXO) has been trading on the NYSE American––or the AMEX exchange for short––and not the main NYSE exchange.
However, HEXO will transfer its listing from the AMEX to the NYSE and will commence trading today. The company’s CEO and co-founder Sebastien St-Louis shared his excitement of the transfer and belief that the listing “reaffirms HEXO’s strong track-record for exceptional corporate governance and is further proof that we are a valuable cannabis industry partner for Fortune 500 companies. HEXO is well-positioned to support consumer packaged goods companies looking to enter the space given our success in the industry, our established infrastructure including a manufacturing center of excellence in Ontario, Canada, our technology to support mass-scale extraction and processing of advanced cannabis products, and our regulatory expertise.” While the CEO’s enthusiasm is certainly clear, what does this mean for HEXO and what are possible outcomes from this listing transfer?
What History Tells Us
We have seen many of the big players in the cannabis sector push for American listings including Aurora Cannabis, Canopy Growth Corporation, Cronos, Aphria, and Canntrust, to name a few. This means that HEXO is now officially joining the ranks of the industry leaders in the cannabis sector. While this might seem like a huge win for HEXO, investors should note that anytime a cannabis company has listed on to one of the larger American exchanges, its stock has dropped substantially. In fact, Aurora, Aphria, and Canntrust are three separate examples of companies that saw 52-week lows in the months following an up listing to American exchanges. This might be a strange coincidence, but a more plausible explanation is that many of these companies rallied on the news that they were up listing only to sell off or get caught in a scandal when the up listing eventually occurred. While history may not repeat itself in the case of HEXO, investors would be wise to tread cautiously as trading commences.
The Current State of Affairs for HEXO
HEXO’s 1-year price performance indicates that the stock is currently sitting right in the middle of its 52-week highs and has substantially pulled back from it 52-week highs over $10 (CAD). HEXO’s CEO mentioned in recent comments that the company’s achievements prove that HEXO is a valuable Fortune 500 company partner, and this could be a hint that more partnerships are on the way. This transfer from the AMEX to the NYSE could be another step for the company in solidifying its position as an industry leader and should serve to enhance the company’s solid reputation. Additionally, HEXO should not be underestimated when it comes to partnerships. The company holds a Joint Venture agreement with Molson Coors for plans to develop cannabis infused beverages. HEXO also has a mid-level production capacity of roughly 150,000 kgs which puts them right in the middle of the largest companies with regards to production capacity.
The Fate of HEXO
The coming weeks are going to be interesting for HEXO as the stock officially transfer and commence trading on the NYSE. At current prices HEXO remains a top stock to watch as the company has done a great job maintaining its reputation in what seems to be tough and competitive environment. Potential upside for HEXO is not in the company’s current operations. Instead, its value lies within its partnership with one of the most reputable brewing companies in North America. This is where HEXO has a huge advantage over other companies and could dominate the space. It will have the ability to leverage Molson Coors’ distribution channel for the eventual roll out of cannabis infused beverages, which would be a massive stream of revenue in the years to come. This coupled with HEXO’s growing popularity and untarnished reputation puts it as one of the top stocks to watch in the weeks to come.
To read more on the nitty gritty of what’s going on in the rising cannabis industry, click here.
Read more on HEXO: