Hexo shares (NYSE:HEXO) rose more than 30% pre-market after the company confirmed its cannabis manufacturing and processing factory in Belleville, Ontario has received its Health Canada license amendment for the sale of dried and fresh cannabis, cannabis extracts, cannabis topicals and edible cannabis products.
“Receiving the sales license for our Belleville facility is extremely positive news for Hexo and Truss, our joint-venture with Molson Coors Canada,” said Sebastien St-Louis, chief executive and co-founder of Hexo.
He added: “This license allows us to increase our processing capability significantly, achieve greater economies of scale, and continue to roll out more innovative 2.0 products across all of our brands Powered by HEXO, including hash, vapes, cannabis beverages, and other edible cannabis products.”
The amendment applies to Hexo’s Belleville, Ontario facility and includes an expansion to include beverage production.
The Belleville facility will serve as the main development, processing and distribution facility for Hexo’s cannabis products. Its strategic location near prime shipping routes in Ontario is part of Hexo’s national expansion strategy. By securing the necessary capacity for the manufacturing and distribution of advanced cannabis products, the producer will be able to better fulfil purchase orders across the country.
Hexo shares, which are listed in Toronto and New York, reacted positively to the news of added capacity, increasing by 18% and ending at $0.93 per share on the Canadian exchange on Monday. This is a modest gain after the recent 12.3% drop when the company said it planned to raise cash through an equity sale. Hexo did not say how much stock it would sell and announced it would price the shares “in the context of the market” and the terms will be determined when it prices the shares. The company said broker Canacord Genuity would lead the deal.
The company’s recent equity offering and facility sales license confirmation increased the potential gains for its stock. Particularly ahead of the potential US legalization catalyst.
Many states have legalized recreational cannabis use, although it remains a controlled substance on the federal level. Analysts expect this year’s US Presidential election to possibly change the odds of legalization in the cannabis stock’s favor.
Canada became the second country after Uruguay to legalise possession and use of recreational cannabis in 2018, and is home to a number of listed cannabis firms which hope to take advantage of any liberalisations in the US market directly on its border.
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