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A flowering cannabis plant is seen during a tour of the Hexo Corp. facility, on Oct. 11, 2018 in Masson Angers, Que.Adrian Wyld/The Canadian Press

The investor leading a proxy battle against the board of HEXO Corp. says he has lost support for its CEO and would consider revamping a C-suite that has already seen significant turnover in recent months.

Last week, Adam Arviv called for a board overhaul as the Gatineau-based cannabis producer’s share price continued to tumble. Mr. Arviv, who owns a 2-per-cent stake in the company, plans to nominate five new directors, including himself, to HEXO’s eight-person board in an effort to turn around the “underachieving company’s disappointing performance.”

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, which closed up 8 per cent to 70 US cents on Wednesday.

“These guys said in December they were going to [implement] their new path forward. Since Dec. 14, the stock’s fallen an additional 25 per cent,” Mr. Arviv told The Globe and Mail Tuesday. “They haven’t acted on their plan from what I’ve seen, and it’s enough. It’s enough of watching them do nothing.”

The company laid off 180 workers on Wednesday as a part of its strategic plan to cut costs. Half of the jobs were back-office roles, while the rest are tied to the February closure of the company’s production facility in Stellarton, N.S. HEXO estimated that the job cuts would result in $15-million in savings on an annualized basis.

In the past six months, HEXO has replaced its chief executive officer, chief operating officer and board chairman, and its chief financial officer is leaving the company next month. Mr. Arviv told The Globe that a letter he wrote to the board in October prompted the turnover, but the executives were replaced with “replicas,” adding that he would consider further changes if he won control of the board.

“As a public company, you need a CEO that can speak to the street and can be a guide. But you need a COO that really knows what they’re doing, and right now I don’t see either of those in place,” Mr. Arviv said.

“I actually really like Scott Cooper,” he said, referring to the current CEO, who ran the company’s beverages business before replacing co-founder Sebastien St-Louis in October.

“I believe that he could be the guy, but where I’ve lost support for him is recently how he has flip-flopped and made it like he was willing to work with me, and then slipping back to listening to [HEXO chairman] John Bell and other members of the board and not acting in good faith of the shareholders.”

Shareholders will be able to vote on the board composition at HEXO’s annual general meeting scheduled for March 8. Mr. Arviv has retained proxy adviser Morrow Sodali for the showdown, and HEXO is represented by Teneo.

Mr. Arviv said his team had been contacted by more than 500 shareholders and has received “tremendous” support.

“I’m pretty confident that we’re going to have a landslide victory,” he said.

In a statement, HEXO called Mr. Arviv’s efforts “disruptive and expensive,” and said it is focused on executing its strategy.

The Board and management team remain focused on executing its previously announced strategic plan, The Path Forward, to solidify HEXO’s position as the number one cannabis company in Canada by recreational market share and become the first amongst its peers to be cash flow positive from operations. Mr. Arviv’s actions serve as an unhelpful distraction.”

HEXO 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.

Being more like Redecan is part of the path to recovery, Mr. Arviv said. The market praised the acquisition at the time, and Redecan’s prerolled cannabis products are among the top sellers in Ontario, according to cannabis analytics firm Headset.

“It was a really well-run business and profitable in an industry that for the most part, especially in Canada, its competitors were all laden with debt,” Mr. Arviv said. “If I were in charge I would want the entire HEXO company, all the assets, to run similar to that.”

Mr. Arviv, who runs Toronto-based investment firm KAOS Capital Ltd., has experience in the cannabis industry. He co-founded BRN Group, a cannabis consulting company, and Green Growth Brands, a defunct cannabis retailer that filed for creditor protection in May, 2020.

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