Cannabis Weekly Round-Up: Tilray Buys HEXO Debt, Creates Alliance

Tilray ties itself to HEXO’s future performance

Two cannabis producers are now closer than ever as Tilray Brands (NASDAQ:TLRY,TSX:TLRY) confirmed a strategic alliance with HEXO (NASDAQ:HEXO,TSX:HEXO).

As part of the deal, Tilray will buy US$211 million worth of HEXO's senior secured convertible notes. Thanks to this purchase, as of Wednesday (March 2), Tilray has the right to convert its notes into an ownership stake of 37 percent in HEXO. The debt in HEXO was originally issued to financial firm HT Investments.

Tilray Chairman and CEO Irwin Simon called the deal a win-win for both parties. The executive celebrated his company’s new position in holding an equity stake in HEXO.

Simon told the Globe and Mail his firm “probably will not convert (the notes) any time soon." One reason for his line of thinking is that HEXO will face a 10 percent interest charge annually on the debt being purchased, which will result in C$20 million in payments to Tilray.

“This strategic alliance will help lower our costs, preserves our stand-alone optionality and we look forward to reaching a definitive agreement shortly,” Scott Cooper, president and CEO of HEXO, said in a statement.

Cooper informed shareholders that his primary goal since being appointed CEO has been to “fix a very challenged balance sheet.” In addition to Cooper’s explanation to HEXO shareholders, Mark Attanasio, chair of the compamy's board of directors, offered the following comments to the market:

“The company has endured a crippling overhang for the past twelve months, due to punitive redemptions and discounted dilutive financings, and we needed to solve this issue in order to make positive progress. This new deal accomplishes this and places HEXO solidly on a path to growth.”

Cannabis players release latest financial results

This past week, cannabis investors received updates on the performance of several companies in the market. Here's a selection of some of the financial results shared to the market:

• Cronos Group (NASDAQ:CRON,TSX:CRON): As the cannabis company resumes its financial reporting, Cronos Group achieved net revenue of US$9.9 million for the entire 2021 year, despite posting a US$133.9 million net loss for the Q4 period.

• Curaleaf Holdings (CSE:CURA,OTCQX:CURLF): The multi-state operator (MSO) reported a net loss of US$28 million for last year's Q4 period. Boris Jordan, executive chairman of Curaleaf, said the company is focused on strong, above-market revenue growth and margin accretion as it anticipates the opening of the New Jersey's adult-use market.

• Green Thumb Industries (CSE:GTII,OTCQX:GTBIF): This MSO celebrated a sixth consecutive quarter with a positive net income line. Additionally, the firm reported net income of US$75.4 million for the entire 2021 period.

• Lowell Farms (CSE:LOWL,OTCQX:LOWLF): Despite achieving a significant increase in revenue for both 2021's Q4 and year-end periods — US$15.1 million and US$53.7 million, respectively — the firm reported a net loss for both time segments.

• RIV Capital (CSE:RIV,OTC Pink:CNPOF): Narbé Alexandrian, president and CEO of RIV Capital, said his firm is focused on its US acquisition and investment plans. It reported a net loss of C$35.4 million for Q3 of its 2022 fiscal year, but boasts a US$319 million cash reserve.

• Village Farms International (NASDAQ:VFF): This firm celebrated progress at its Canadian cannabis operations and reported a successful quarter thanks to its Pure Sunfarms subsidiary, as well as its recent acquisition of Rose LifeScience. “We believe 2022 promises to take the scale and profitability of our Canadian cannabis operations to a new level," CEO Michael DeGiglio said.

Cannabis company news

• Organigram Holdings (NASDAQ:OGI,TSX:OGI) confirmed that its investment partner, British American Tobacco (NYSE:BTI,LSE:BATS), will increase its ownership position to 19.5 percent by paying C$6.3 million to the cannabis producer.

• Truss Beverage, a cannabis drink company from Molson Coors Canada and HEXO, announced the appointment of Dave Schlosser as president and CEO of the joint venture. He is replacing HEXO's Cooper, who took his position at the helm of that company last year. “The potential of the cannabis beverage industry is truly endless, and I’m excited to lead the incredible team at Truss into such an exciting period of growth,” Schlosser said.

• High Tide (NASDAQ:HITI,TSXV:HITI) will acquire the storefront operations of Crossroads Cannabis for C$2.5 million. The transaction will aid in High Tide’s goal of overseeing 150 cannabis stores in Canada by the end of 2022. “The pandemic has resulted in longer lead times to open stores organically, and by consolidating the retail landscape through accretive acquisitions, we are keeping up the momentum of overall store expansion,” President and CEO Raj Grover said.

• Acreage Holdings (CSE:ACRG.A.U,OTCQX:ACRHF) appointed Dennis Curran as its new chief operating officer. In addition, the firm informed shareholders of the resignation of General Counsel James Doherty. “The Company has done phenomenal work over the last year to become profitable and to reposition the business for growth in several key markets,” Curran said.