An investor in HEXO Corp. HEXO-T has called for a board overhaul as the Gatineau-based cannabis producer’s share price continues to tumble.
Adam Arviv, who owns a 2-per-cent stake in the company, announced in a Thursday media release that he plans to nominate five new directors – including himself – to HEXO’s eight-person board in an effort to turn around the “underachieving company’s disappointing performance.”
HEXO’s share price has been in freefall, plummeting more than 90 per cent in the past 12 months, as the company has faced debt woes, reputational issues, regulatory scrutiny, and a shakeup in its senior ranks. HEXO shares, which trade on the Nasdaq Stock Market and the Toronto Stock Exchange, closed down 10.7 per cent on the TSX on Thursday.
“The market has spoken loudly and HEXO shareholders have made it clear that they have no confidence in the direction of the company,” Mr. Arviv said in the release. “Without monumental change, HEXO shares will continue their unrelenting descent.”
In the three months ended Oct. 31, HEXO posted a net loss of $117-million on $50-million in revenue. The company faces severe debt pressure as it repays a US$327-million convertible loan that was used to fund its $925-million purchase of private cannabis producer Redecan Inc. in May.
“The board is reviewing Mr. Arviv’s submission,” HEXO said in a statement. “We have welcomed an open and constructive dialogue with Mr. Arviv over the past months. It is disappointing that Mr. Arviv has decided to proceed with this unnecessary, disruptive and expensive approach rather than continuing working with the company in a normal course.”
Mr. Arviv, who runs a Toronto-based investment firm called KAOS Capital Ltd., has prior experience in the cannabis industry. He co-founded BRN Group, a cannabis consulting company, and Green Growth Brands, a defunct cannabis retailer that filed for creditor protection in May, 2020.
Mr. Arviv’s nominees are Mark Attanasio, Craig Bromell, Rob Godfrey and Aidan Rasalingam. He will submit the nominees to replace most of HEXO’s board at the company’s annual general meeting scheduled for March 8.
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