Tilray, Hexo stocks fall sharply after M&A deal

Tilray Brands Inc.
TLRY,
+5.38%

TLRY,
+6.27%
stock is down 8% in premarket trades Tuesday after the cannabis company posted a wider-than-expected loss, missed its revenue estimate and said it would buy fellow Canadian cannabis company Hexo Corp.
HEXO,
+30.16%
for $56 million in an all-stock deal. Hexo stock is down 23%. Tilray’s third-quarter loss of $1.90 a share fell short of the analyst expectation for a loss of 6 cents a share. The company’s third-quarter revenue of $145.6 million missed the forecast of $145.6 million.  Hexo shareholders will receive 0.4352 of a share of Tilray for each Hexo share, for an implied purchase price of $1.25 per Hexo share based on the volume weighted average price of Tilray on the Nasdaq for the 60-day period ended on April 5. TD Cowen analyst Vivien Azer said the acquisition “should not come as a surprise to investors” because the two companies have been collaborating since last year on cultivation, production and packaging. “With cost-cutting ahead of the transaction, we have a high degree of confidence in targeted cost savings,” Azer said. “Canadian cannabis remains tough; consolidation should help.”