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Hexo Forecast ‘Significant’ Shareholder Return Despite Tumbling Stock Price

Ahead of its annual meeting, #Canadian #cannabis producer #Hexo Corp. is trumpeting “a significant positive total cumulative return” for its #shareholders between #2017 and last #July – even though the #stock tumbled more than 20% during that time and is at risk of being kicked off the #Nasdaq. #Quebec-based Hexo’s description of its stock performance is contained in a #February filing with the #US Securities and Exchange Commission and was used to justify significant #pay increases for its top #executives.

The #proxy circular, sent by the company in advance of its coming annual meeting in #March also asks shareholders to give management authority to #consolidate shares and regain compliance with the Nasdaq’s continued listing standards. In the filing, a “performance graph” compares the total cumulative shareholder return for 100 Canadian dollars ($78) invested in Hexo shares between 2017 and #July 31, 2021, versus the same amount of #money invested in the S&P/TSX #Composite Index. July 31 marks the end of Hexo’s #fiscal year. According to the chart and accompanying table, CA$100 invested in Hexo shares in 2017 would be worth CA$79.84 as of July 31, 2021, amounting to a 21% loss.

Despite the loss, the company’s circular states the trend represents “a significant positive total cumulative return” for shareholders since 2017. “During the same period, total compensation received by (#executives) increased in line with this trend as the transaction was completed and the Corporation raised substantial #capital and significantly expanded its #business,” according to the filing. “Based on the growth and results of the corporation over this period and the return to Shareholders, no material misalignment exists between the compensation of the (executives) and the return to shareholders.”

The filing doesn’t identify the transaction Hexo conducted during that particular year and

in 2017, Hexo’s highest-paid executives collectively earned CA$1.4 million in total compensation. That rose to CA$3.5 million the following year. In 2019 and 2020, the figures rose again to CA$15.2 million and CA$15.8 million, respectively, before falling to CA$8.6 million in 2021. Over the 4-year time period between #March 21, 2017 and July 31, 2021, the company’s shareholders have on balance received positive total cumulative returns. In the 2020 financial year, it awarded its then-#CEO, Sebastien St. Louis, total compensation of CA$11.2 million, mostly in option-based awards.Then was fired one year later, after #auditor #PricewaterhouseCoopers warned of “substantial doubt” about the company’s ability to continue as a going concern. The company’s shares trade as HEXO on the Nasdaq and #Toronto Stock Exchange.

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