Cannabis Sector Reverse Splits – The Good, The Bad, And The Ugly

In 2020, one of the most interesting themes of the cannabis sector was related to the number of reverse stock splits that were announced by large companies. The reason we found this interesting is because these cannabis operators were forced to conduct reverse stock splits in order to remain listed on a big board US stock exchange like the New York Stock Exchange (NYSE) or the Nasdaq.

So far this year, we have seen the reverse stock split trend continue and we expect to see more reverse splits that we did in 2020. Today, we want to highlight 5 cannabis companies that have either conducted a reverse stock split to uplist onto one of these big board stock exchanges or companies that have been forced to conduct a reverse stock split to remain listed on such exchanges.

Aurora: Conducts Reverse Split to Remain Listed on the NYSE

We believe that Aurora Cannabis (ACB.TO) (ACB) is the most high-profile company to conduct a reverse stock split in order to remain listed on the NYSE. Last year, the Canadian cannabis producer announced a 12 for 1 reverse stock split to bring the stock price well above the exchange’s minimum required price level.

Following the reverse stock split, Aurora Cannabis traded in a volatile pattern and this is a trend that we continue to closely follow. The company has reported a number of transformational developments following the reverse split and we will monitor how the changes support the growth of the business over the long-term.

HEXO: Lowered the Size of the Planned Reverse Split

From a reverse stock split standpoint, HEXO Corporation (HEXO.TO) (HEXO) has followed a pattern that is similar to Aurora Cannabis. The reason we consider it to be similar and not the same as Aurora Cannabis is due to HEXO’s management team changing the structure of the reverse split prior to it taking effect.

In late December, HEXO completed a 4 for 1 reverse stock split and the trend has been less volatile when compared to Aurora Cannabis. A few weeks prior to the split taking effect, the management team reported to have changed the terms of the transaction from being an 8 for 1 reverse split to a 4 for 1 reverse split.

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