HEXO Stock Alert: Tilray to Acquire Hexo in $56 Million Deal

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  • Tilray Brands (TLRY) is buying rival Hexo (HEXO) for $56 million of stock.
  • The cannabis industry is losing money and continues to consolidate.
  • Tilray is now heavily invested in craft beer brands.
HEXO stock - HEXO Stock Alert: Tilray to Acquire Hexo in $56 Million Deal

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Tilray Brands (NASDAQ:TLRY) announced it is acquiring rival cannabis company Hexo (NASDAQ:HEXO) as the industry continues to consolidate.

The announcement was made in Tilray’s earnings release. The price, $56 million, will be paid for in TLRY stock, 0.4352 shares of Tilray per one share of HEXO.

HEXO stock jumped 30% as the deal approached, then fell 22% overnight as investors saw what they were getting. HEXO, trading at $1.31 per share before the news came out, was due to open on April 11 at $1.27. TLRY jumped 5% in anticipation of the news and fell 6% overnight to open at $2.59.

One Plus One Equals Beer

Marijuana became legal in some states a decade ago and in Canada in 2018. There were high hopes for the industry at the time, and tax revenue grew quickly.

But regulatory strictures, and a demand for equity on behalf of communities damaged by the illicit industry, have resulted in the illegal pot often being cheaper and easier to get than the legal stuff.

The result was falling government support, even in Europe, where legalization has been widely expected. In the U.S., legalization has gone on the back burner, leading to falling prices and losses.

At Tilray, for instance, 2022 revenue was hardly better than in 2021, with a gross loss of 11%. Tilray said it tried to cut costs and that it still has $408 million in cash.

What is Tilray doing with its cash? Last November, it acquired Montauk Brewing, New York’s largest craft beer brewer. Tilray began its move into beer in 2020, buying the parent of Atlanta’s Sweetwater Brewing.

HEXO Stock: What Happens Next?

If the second-largest pot company in the world is becoming a brewer, it may be all you need to know about the industry.

On the date of publication, Dana Blankenhorn held no positions in any companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.


Article printed from InvestorPlace Media, https://investorplace.com/2023/04/hexo-stock-alert-tilray-to-acquire-hexo-in-56-million-deal/.

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