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HEXO Stock Has Crashed — And It May Drop Even More

HEXO stock withdrew its outlook, and investors don't like the way this looks

Hexo (NYSE:HEXO) stock is crashing. In just two days, shares dropped from $4 to $2.53 with no signs of recovery at all. It may fall even farther. The entire cannabis sector is under pressure, but the performance of  HEXO has been exceptionally bad.

HEXO Stock Has Crashed -- And It May Drop Even More
Source: Shutterstock

There are some things going on here that are very interesting. Chief Financial Officer Mike Monahan recently resigned after just four months with the company. He said that he wanted to spend more time with his family and that the position required him to often be away from home.

Sometimes the departure of a senior executive can be bad for a company’s stock price. In the case of HEXO stock, in the following days after the announcement the stock only drifted marginally lower.

Hexo Withdraws Its Outlook

Then the bombshell hit. On Oct. 10, HEXO announced that it would be withdrawing its previously issued financial outlook for 2020. This is what caused the stock to get crushed. Why is this so bad? It’s because many investors believe the optics are terrible and that there could be serious issues with the company.

The story of Monahan’s departure seems somewhat questionable. It’s kind of hard to believe that a senior-level executive would accept a position without understanding how much time and travel would be required. Maybe this is true, or maybe he just couldn’t get along with some of the other members of management. Regardless, I wish him all the best.

After this, the company withdrew its earnings outlook. This is obviously a concern to investors because the perception is that, at best, there has been some very sloppy accounting at HEXO. At worst, some investors could believe it’s an indication that Monahan saw something that he thought was unethical or illegal going on. This made him decide to cut his association with the company.

I am not saying that this is what happened. It is entirely possible that Monahan’s story is true and that there is a legitimate reason for withdrawing the outlook. It’s the optics that are the problem. These actions have scared shareholders, or prior shareholders at this point, and this is what caused them to sell their stock so aggressively.

Hexo will be reporting its annual results for fiscal 2019, which ended in June, on Oct. 24. I am looking forward to the conference call. This is when the management discusses the results and other issues. There will probably be serious questioning by angry shareholders that have lost a lot of money.

A Look at HEXO Stock

A Look at HEXO Stock

As recently as May, HEXO stock was trading above $8 a share. The most recent close was at $2.53. This was the lowest price of the day which means that there wasn’t any rebound or recovery.

At the time of this writing, Mark Putrino did not have any positions in the aforementioned securities.

Article printed from InvestorPlace Media, https://investorplace.com/2019/10/hexo-stock-has-crashed-and-it-may-drop-even-more/.

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