HEXO Corp. HEXO-WT-A-T has appointed three new directors to its board, settling a proxy dispute with an investor that was critical of the company’s performance.
The shakeup comes after Adam Arviv, who owns a 3-per-cent stake in HEXO through his investment firm Kaos Capital Ltd., called for a board overhaul at the beginning of February. He planned to nominate five new directors – including himself – to the eight-person board to turn around the “underachieving company’s disappointing performance.”
The Gatineau-based cannabis producer announced on Tuesday that former chair John Bell, chief executive officer Scott Cooper and two other members had resigned from the board.
They are replaced by Arviv candidates Mark Attanasio and Rob Godfrey. Mr. Attanasio, who will be the chair, is president of Nocera Investment Corp., a private investment fund focused on high-growth companies. Mr. Godfrey is the president and CEO of Vector Health Labs, a laboratory services company.
Mr. Arviv told The Globe and Mail that the new board represents a “clear victory” for HEXO and its shareholders.
Hélène F. Fortin, an experienced auditor, will also join the board and chair the audit committee. As part of an agreement with HEXO, Mr. Arviv has the right to nominate an eighth board member after the company’s annual shareholder meeting on March 8.
“The management team looks forward to working with the refreshed board as we build the company’s next chapter,” HEXO said in a statement to The Globe. “With regards to Adam Arviv, we are happy to see that he will be supporting management moving forward as we aim to become a cash-flow-positive business and drive shareholder value.”
Shares of HEXO dipped 3.8 per cent on the Nasdaq stock market on Tuesday afternoon. HEXO’s stock has lost more than 90 per cent of its value in the past 12 months and risks being delisted from the Nasdaq exchange because of its low share price.
The plummeting share price represents the tumult HEXO has faced in the past year. The company faces severe debt pressure as it repays a US$327-million convertible loan used to fund its $925-million purchase of private cannabis producer Redecan Inc. in May. The deal required HEXO to pay back the loan in cash over the next year if its share price fell below US$1.50. HEXO shares dropped 6.1 per cent to 56 US cents on the Nasdaq on Tuesday.
There has also been instability in its senior ranks. The company has replaced its CEO and chief operating officer in the past six months, and Mr. Attanasio will be the third board chairman in the same period. HEXO’s chief financial officer is leaving the company next month.
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