It’s been a rough week for Quebec cannabis firm Hexo Corp. (TSX: HEXO) (Nasdaq: HEXO). With stock falling low enough to risk losing its Nasdaq listing, a shareholder is demanding a shakeup of the legacy board.
On Wednesday, shareholder Adam Arviv, who owns about a 2-per-cent stake in Hexo, called for five new independent directors to replace most of the current board members, in hopes of turning around the company’s “disappointing performance.”
“This has to stop,” Arviv says in a statement. “The market has spoken loudly and Hexo shareholders have made it clear that they have no confidence in the direction of the company and in the ability of the incumbent board to right the ship and reverse the downward slide. Without monumental change, Hexo shares will continue their unrelenting descent.”
He plans to submit his name and four others as board replacements during a shareholder meeting on March 8.
Arviv is accusing Hexo of taking a number of missteps last year, leaving it in “severe financial distress.” He says the firm is on track to run short of capital to run day-to-day operations, and risks bankruptcy.
Company stock on Thursday was down more than 11 per cent to US$0.59 on the Nasdaq. A year ago, shares were trading at a high of more than US$13.
Earlier this week, Nasdaq warned Hexo its shares fell below the minimum bid price of US$1 for 30 days straight. The firm has been put on notice to regain compliance by July 25 or it will lose its listing.
Read more: Hexo could lose its Nasdaq listing
According to reports from Yahoo Finance and BNN Bloomberg, Arviv, a former Redecan advisor, sent a letter to Hexo’s board on Sept. 26, stating that St-Louis had over-leveraged the company to finance the acquisitions, suggesting that the letter played a part in the CEO’s sudden exit in October.
In the statement Wednesday, Aviv says the departure of former CEO Sebastien St-Louis wasn’t enough to stop the plummeting share value.
“Shareholders of Hexo deserve leadership that can deliver a tangible future. Despite the necessary removal of Mr. St-Louis, it is very clear that to reverse course, the majority of the board needs to be replaced with new, independent directors who have the experience and expertise to successfully navigate back to exceptional performance. Only in this way will we unlock the massive shareholder value that is trapped in Hexo.”
A Hexo spokesperson tells Mugglehead the firm has welcomed an “open and constructive dialogue” with Arviv, but says it’s disappointing he “decided to proceed with this unnecessary, disruptive and expensive approach rather than continuing working with the company in a normal course.”
The spokesperson says the firm is focused on its “path forward” strategy towards cash positivity, and that “Arviv’s actions serve as an unhelpful distraction.”
While Hexo says it’s reviewing his board submissions, it adds that the firm’s governance committee is in the process of preparing recommendations for the board to be shared with shareholders before the annual general meeting.
Arviv, who is the CEO of KAOS Capital Ltd. and a strategic advisor for ORYX Gaming, is nominating himself to the board, along with Mark Attanasio, a director of Nocera Investment Corp; Craig Bromell, president of The Building Union of Canada; Rob Godfrey, president of Brown Lab Industries Inc.; and Aidan Rasalingam, executive VP of Retail at Canyon Cannabis.