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Putting a Hex On

Hexo Corp (NYSE: HEXO) produces and sells cannabis-based products.  The firm is based in Canada and has a market capitalization of $650M.  Cannabis names have been popular shorts in 2019 and HEXO is no exception.  The borrow fee has ranged between 10% and 50% before early October when the company announced the resignation of its CFO.  Some research analysts also downgraded the stock, and the borrow fee spiked to 125%, coming back into the 40s today. 

Utilization is at 70% and short interest is 13% of the float.  Share price volatility may also be driving shorting demand, as the price fell from a 52-week high of $8.40 in April 2019 to a $2-handle today.  We are seeing inventory from both Canadian and US lending desks.  Seven counterparties asked the IBKR Securities Lending desk for availability before the open.

Disclosure: Interactive Brokers

The analysis in this material is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Disclosure: Margin Trading

Trading on margin is only for sophisticated investors with high risk tolerance. You may lose more than your initial investment.

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