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Wednesday, November 25, 2020

In Hexo Corp (OTCMKTS:HYYDF) We “Truss”

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Hexo Corp (OTCMKTS:HYYDF) has become perhaps the default leader in what is starting to be recognized as the boom within the boom for cannabis space: cannabis-infused beverages. The reason for that leadership position is the deal the company made in August with Molson Coors (TAP). Speaking of which, the company just announced, along with TAP, that they have closed the transaction announced on August 1, 2018, to form a joint venture to pursue opportunities to develop non-alcoholic, cannabis-infused beverages for the Canadian market following legalization.

According to the release, “The joint venture, Truss, will be led by former Molson Coors executive, Brett Vye, in the role of Chief Executive Officer. Vye will report to the Truss board of directors consisting of three members appointed by MCC and two members appointed by HEXO.”

Hexo Corp (OTCMKTS:HYYDF) trumpets itself as a company that, together with its subsidiaries, produces and distributes medical marijuana products. The company is headquartered in Gatineau, Canada, and, as noted above, just changed its corporate name from “The Hydropothecary Corporation” to “HEXO Corp.” effective August 29, 2018.

HEXO creates and distributes innovative, easy-to-use and easy-to-understand products to serve the Canadian cannabis market. One of the country’s lowest-cost producers, HEXO is rapidly increasing its production capacity in the lead up to the adult-use cannabis market.

The Company currently operates with over 310,000 sq. ft. of production capacity with construction on another 1,000,000 sq. ft. expansion set to be complete by year-end. HEXO will serve the adult-use market under the HEXO brand, while continuing to serve its medical cannabis clients through the well-known Hydropothecary brand.

According to company materials, “HEXO Corp. creates and distributes innovative, easy-to-use and easy-to-understand products to serve the Canadian cannabis market. One of the country’s lowest-cost producers, HEXO is rapidly increasing its production capacity in the lead up to the adult-use cannabis market. The Company currently operates with over 310,000 sq. ft. of production capacity with construction on another 1,000,000 sq. ft. expansion set to be complete by year-end. HEXO will serve the adult-use market under the HEXO brand, while continuing to serve its medical cannabis clients through the well-known Hydropothecary brand.“

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As discussed above, the high-profile JV with Molson Coors has now closed, thus launching the Truss JV entity, which will be a force to be reckoned with in the emerging juggernaut that is the cannabis beverage space.

“With the backing of two partners with deep Canadian roots, proven success, and market-leading experience in the respective beverage and cannabis industries in Canada, Truss will hit the ground running,” said Brett Vye, Chief Executive Officer at Truss. “When consumable cannabis is legalized in Canada, Truss will be ready to make its mark as a responsible leader in providing high-quality beverages for the Canadian consumer.  Why “Truss”?  We are joining together the extensive experience and excellent practices of each partner to build a powerful foundation for the future.”

Importantly, according to the release, “Truss is structured as a standalone company with its own board of directors and independent management team. MCC has a 57.5% controlling interest with HEXO holding the remaining 42.5%. The five-member board of directors for the joint venture will initially comprise Frederic Landtmeters, President and CEO of MCC; Paul Holden, VP of Legal and Industry Affairs of MCC; Scott Cooper, VP, Global Innovation of Molson Coors (Chairman of the Truss Board); Sebastien St-Louis, CEO and co-founder of HEXO, and Ed Chaplin, CFO of HEXO.”

Currently trading at a market capitalization of $1.24B, HYYDF has a significant war chest ($248.9M) of cash on the books, which stands against about $9.8M in total current liabilities. HYYDF is pulling in trailing 12-month revenues of $4.4M. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 4.9%. We will update the story again as soon as further details emerge. Sign-up for continuing coverage on shares of $HYYDF stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!

Disclosure: we hold no position in $HYYDF, either long or short, and we have not been compensated for this article.

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