(Reuters) - Hexo Corp’s second-largest shareholder urged the cannabis producer to consider strategic options including a sale, saying its stock was undervalued.
Riposte Capital LLC, which has a 2.5 percent stake in the company, said Hexo needs to step up efforts to lower the cost of capital to take advantage of the growth in Canada’s cannabis sector.
Hexo’s contract with Société des alcools du Québec, the industry’s largest and longest government contract, and its joint venture with Molson Coors Brewing had not translated into an appropriate equity price, the investor said in a letter to the board.
The New York-based investor said Hexo’s market capitalization of about C$1 billion was significantly below the $23 billion market cap of rival Canopy Growth Corp, the only other company with an alcohol partnership.
Canadian marijuana companies have been on a buying spree to beef up their portfolio ahead of marijuana sales becoming legal in the country from Oct. 17.
Reporting by Karan Nagarkatti in Bengaluru; Editing by Sriraj Kalluvila