HEXO deal could be a big win for Tilray, this analyst tells us why

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On Wednesday Hexo Corp hexo A staggering loss of CAD$152.7 million was reported in ($118 million) third quarter of 2022, a. represent 638% YoY growth.

Gross profit was a loss of $5.27 million compared to a CA$8.82 gain in the same quarter of 2021, during Revenue of CA$45.6 million also declined 14% sequentially.

The company ended quarter a . Done with Financial net debt of CAD$166 million, The results report followed Joe Declaring Modification of Agreement with Tilray Brands TLRY originally came out in March.

The Canadian cannabis giant entered into a strategic partnership with HEXO – a Debt Financing Agreement – under which it is agreed Received $211 million of senior secured convertible debentures originally issued by HEXO to HT Investments MA LLC. In April, Tilray entered into a definitive agreement to purchase 100% of the remaining $193 million in outstanding principal of the Senior Secured Convertible Note.

“The agreement with HEXO delivers on both fronts as it facilitates collaboration, shares best practices and creates quantitative operational efficiencies between two companies with unparalleled global cannabis expertise.” Irwin D Simonsaid the chairman and CEO of Tilray Brands at the time.

Earlier this week, that The deal has been changed To meet current stock market conditions and mitigate transaction risk. Irrespective of this, the company a 2692106 Ontario Inc. and Amendment to the Stock Purchase Agreement with KAOS Capital Limited Which was approved by Hexo shareholders on Thursday.

Cantor Fitzgerald analyst Pablo Juanic In his recent note that The changes suggest that Tilray will buy the outstanding convertible notes, which currently stand at $185 million, at a discount of 10.8%.

“The agreement with Tilray extends the term of the short-term convertible loan and prevents future repayments,” the analyst said.

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Juanic Hexo maintained a neutral rating on the stock with lower sell estimates, a higher share count and a lower price target on the sector derivative from CA$0.75 to CA$0.35.

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Hexo is currently $100 value in market cap, Which Juanic says has a low valuation, which is attributed to higher debt, negative earnings and cash flows, and the risk of continued shareholder dilution.

He said anyway Tilray could benefit from Hexos Travels.

He stressed that Tilray can do that Under the original agreement, take advantage of the current market situation and crisis HECO is facing to negotiate terms, spend less cash and eventually cover debt in the form of a 50% stake in the Canadian company instead of 37%.

“all Looks pretty enticing for Tilray (It will pay HT Inv with $50m in convertible bonds due 9/1/23 and the balance in either cash or stock) as it can take 50% control of the Large Scale Company (HEXO) in Canada. REC market (according to Hifyre) using its $1.6 billion market cap (vs. HEXO at $94 million),” said Zuanic.

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price action

by Hexo Shares are trading up 4.86% at $0.2180 per share Thursday morning during the pre-market session.

Tilrays Shares traded 2.19% lower at $3.13 per share Thursday morning during the pre-market session.

Photo: Unsplash. Courtesy of the campaign creator

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