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HEXO investor urges company to consider sale, privatization to boost valuation

New York-based asset manager Riposte Capital LLC is urging cannabis company HEXO Corp. to consider ways to boost its stock valuation, including going private, selling or merging with a peer.

In a Sept. 5 letter to the Canadian company, the asset manager said HEXO's valuation of C$1 billion remains depressed despite holding the industry's largest government contract and a venture with a large alcohol company. Denver-based brewer Molson Coors Brewing Co. in August agreed to form a joint venture with HEXO to develop nonalcoholic, cannabis-infused drinks.

Riposte, the second largest public shareholder of HEXO, suggested several ways to boost the company's valuation, including a possible sale at a significant premium. The asset manager also suggested taking the company private, selling up to 20% of its stake to Molson Coors, or exploring a merger with a peer.

Riposte compared HEXO with the nearly C$23 billion market capitalization of Canopy Growth Corp., the second cannabis producer to have a partnership with a large alcohol company. The asset manager said HEXO's intrinsic value should be C$18 per share considering the venture with Molson Coors alone has a potential valuation of C$500 million.

Since the HEXO board has previously rejected any potential sale, Riposte urged HEXO to rethink its stand before an upcoming board meeting and initiate a review of strategic alternatives.

Shares of HEXO, which was previously called The Hydropothecary Corp., were up over 16% to C$6.87 as of 4:05 p.m. ET, according to data from S&P Global Market Intelligence.