At the time of writing, HEXO stock is selling for $7.13 USD and up almost 2%. News that the company has begun to close its acquisition of Newstrike Brands is clearly exciting investors.
Let’s check this out.
HEXO Corp (TSX:HEXO) (NYSE:HEXO) acquired Newstrike Brands (TSXV:HIP) (OTC:NWKRF) for roughly $197 million in March. The take-over sent shock waves through the industry. HEXO—already one of the most formidable second-tier cannabis companies—can now expect its operations to grow rapidly.
Combining this new acquisition potential with HEXO’s lower valuation has sealed the deal for many investors and analysts.
For example, recently, HEXO stock received a significant push from Bank of America analyst Christopher Carey. Enthusiastic about HEXO’s prospects, he has set a one-year price target that is a 40% premium above the current selling price.
Now, HEXO stock is climbing further on the company’s news that it has “secured hard lock up support for 38.3% of Newstrike shareholders.” Effectively, this means the company has received the necessary amount of support from Newstrike shareholders, and the deal can close.
HEXO CEO Sebastien St-Louis said the following:
“This is a great recognition of the extreme alignment between both companies’ management and boards, as well as a vote of confidence in HEXO’s vision for the future.”
A Big Deal
HEXO’s all-stock deal with Newstrike is notable for two reasons in particular. It will further cement domestic supply with Canadian provinces. But it will also significantly increase HEXO’s production capacity by over 1/3.
If estimations are to be accurate, HEXO Corp will now be the sixth largest cannabis grower in North America. How this translates in numbers is that before this deal, estimated annual output was 108,000 kilos. Now it’s estimating 150,000 kilos at its peak.
This is all the more impressive when you revisit the size of HEXO. It is mid-tiered with a market cap of $2.02 billion.
HEXO has been a cannabis company that has gone from strength to strength in 2019. Is HEXO stock on your radar?
Featured Image: Canva