HEXO Stock: New Common Shares are Priced at $6.50 CAD

hexo stock

On Tuesday, HEXO Corp (TSX:HEXO) (NYSE:HEXO) announced a public offering of common shares. The news wasn't received too well by investors and HEXO stock decreased on the day by approximately 10%.

Now, the company has released the price of those new shares: $6.50 CAD. 

HEXO Stock Common Shares

Lead underwriters for the deal are CIBC Capital Markets and BMO Capital Markets. They have agreed to buy 7,700,000 common shares for the gross price of $50,050,000 CAD to HEXO.

According to the press release, the company needs the revenue for "general corporate purposes, including funding the Company’s global growth initiatives and research and development to further advance the Company’s innovation strategies."

The underwriters have also been granted an over-allotment option whereby they can choose to buy an additional 1,155,000 common shares at the same price of $6.50. They have until the end of February to decide on this.

The offer will close on January 30th provided the TSX and NYSE exchanges sign off on the new listing.

HEXO Stock Today

The new offering of common shares is not sitting well with investors if the chart is anything to go by. Since the news was released, HEXO stock has continually decreased. Today on the TSX, shares are selling for $6.69 CAD, down a further -3.32%, representative of a 6% drop overall on the week.

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Most likely, the reason will be stock dilution. Effectively, the total number of shares outstanding will increase, and this can have a dilutive effect on the value of existing shares.

There is potential the decrease will extend into next week. Expect a continued drop in HEXO stock as short-term sellers quickly exit with their profits in tow, before the possibility of their shares diluting.

There is also likely to be questions over the price of these new shares, at $6.50. Undercutting the current value of HEXO stock isn't saying much for existing shareholders and any significant stock growth on the horizon.

 

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