Tilray (TLRY) partners with HEXO: 2 TSX pot stocks to closely watch?

Highlights

Tilray Brands (TSX: TLRY) and Hexo Corp (TSX: HEXO) made headlines on Thursday, March 3, after the two cannabis giants announced a significant strategic alliance.

In the wake of this new development, Tilray stock was dwindling by roughly four per cent as of 10:37AM EST on Thursday, while Hexo stock was up by nearly nine per cent.

Tilray said on Thursday that it has agreed to acquire up to US$ 211 million of Hexo’s senior secured convertible notes, which will enable it to buy an equity stake in the rival firm by exercising convertible rights at C$ 0.90 per share.

Tilray Brands (TSX: TLRY) and Hexo Corp (TSX: HEXO) made headlines on Thursday, March 3, after the two cannabis giants announced a significant strategic alliance.

In the wake of this new development, Tilray stock was dwindling by roughly four per cent as of 10:37AM EST on Thursday, while Hexo stock was up by nearly nine per cent.

What to know about the Tilray (TSX: TLRY)-Hexo (TSX: HEXO) deal?

Tilray said on Thursday that it has agreed to acquire up to US$ 211 million of Hexo’s senior secured convertible notes, which will enable it to buy an equity stake in the rival firm by exercising convertible rights at C$ 0.90 per share.

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This strategic partnership is expected to allow the Quebec-based company to restructure its debt and strengthen its balance sheet, which will help turn into a cash flow positive business, said Hexo.

Tilray, on the other hand, expects to get exposure to additional upside and Hexo Corp’s growth opportunities.

Tilray and Hexo’s latest financial performance

Tilray reported a net profit of US$ 6 million in Q2 FY2022 against a net loss of US$ 89 million a year ago.

Hexo, on the other hand, posted a total net loss of C$ 116.9 million in Q1 FY2022 compared to C$ 4.19 million in Q1 2021.

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Tilray and Hexo’s stock performance

Tilray stock was trading in the red at a price of US$ 7.09 apiece at the time of writing this on Thursday. TLRY stock has also slipped by over 21 per cent year-to-date (YTD).

Hexo stock, on the other hand, jumped up to trade at C$ 0.8 apiece at 10:37AM EST on Wednesday, noting a week-to-date gain of almost 18 per cent.

Bottomline

Tilray and Hexo are the two known cannabis giants in the North American markets. With this deal, both the companies are set to realize up to C$ 50 million in commercial and production efficiency savings within two years, as per the release.

This savings is set to be shared equally between the partners, making them low-cost pot makers and ones to watch closely in the cannabis market.

Kajal Jain

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Kajal is a commerce graduate with expertise in the financial corporate sector. At Kalkine, she writes on Canadian equities and markets. In her free time, she enjoys music and gardening and likes to travel....
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Shreya Biswas is a multimedia journalist with a degree from the Asian College of Journalism. Previously a literature student-turned-political reporter, she now writes on market trends at Kalkine Media. When not chasing deadlines, she enjoys blogging....