HEXO stock is down on Monday morning after the company revealed that a "limited quantity" of unlicensed cannabis was grown at a facility in Niagara, Ontario, which HEXO Corp (TSX:HEXO) (NYSE:HEXO) acquired from Newstrike Brands earlier this year.
HEXO Stock Down 7% Following Licensing Update
In a press release on Friday, the Quebec-based firm said that prior to its acquisition of the facility in November 2018, it was under the impression that "Block B" at the facility had been adequately licensed to cultivate cannabis. This was reinforced in February of this year following an inspection by Health Canada in which the matter was not raised.
Shortly after the acquisition was closed in July, HEXO Corp became aware that Block B was, in fact, not adequately licensed for cultivation, and the company immediately ceased production in the space and notified Health Canada. Despite following what the regulator described as the correct course of action, and providing full transparency on the matter today, HEXO stock is down 7.6% in Toronto.
"Upon discovering that cannabis was being grown in an inadequately licensed area of the Niagara facility we immediately ceased all activities and notified Health Canada. While we are disappointed with what we uncovered, we assume responsibility for any issues with UP products prior to the acquisition,” said CEO and co-founder Sebastien St-Louis. HEXO shares are currently trading at $2.17.
Further Trouble for HEXO Stock
The facility is no longer operational today after the company announced in October that it was right-sizing its operations and winding down business in Niagara. The cannabis grown at the site is now being cultivated at a Gatineau, Quebec facility, and an indoor facility in Brantford. The Niagara facility remains fully licensed today and could recommence operations should the demand increase. HEXO stock fell below the $2 mark last week for the first time in nearly two years after the release of disappointing results, with today's news only adding further misery to the troubled pot stock.
Featured Image: Canva