Tilray Resolves a Small Issue but Bigger Problems Remain

Chances are that investors would struggle to find a bigger (or buzzier) long-term growth opportunity at the moment than marijuana. Although black market cannabis sales continue to dominate, legal channel sales are soaring as new countries and U.S. states wave the green flag on medical marijuana and recreational pot.

Last year alone, legal weed sales surpassed $12 billion. But by the end of the upcoming decade, we could see worldwide cannabis sales regularly hitting $50 billion to $75 billion per year. It’s this expectation of rapid sales growth that make pot stocks such an intriguing investment opportunity.

Among the most popular marijuana stocks is Canadian-based Tilray (NASDAQ:TLRY), which made a lot of noise last year after its initial public offering on the Nasdaq. As the first cannabis company to IPO on the tech-heavy exchange, Tilray rapidly soared from its list price of $17 in mid-July to as high as $300 per share on an intraday basis less than two months later. Shares of the company have since cooled considerably, with its valuation falling more than 85% since its all-time intraday high.

The company itself has faced a laundry list of challenges over the past year. However, earlier this week, it removed one item on the list.

Tilray’s shareholders no longer need to worry about a Privateer Holdings share dump

On Monday, June 10, Tilray announced that it would acquire private equity firm Privateer Holdings, the company’s largest shareholder, in a downstream merger. Privateer, whose executive chairman, Brendan Kennedy, is also the CEO of Tilray, holds 75 million shares of Tilray stock, which currently equates to 77% of the company’s outstanding share count.

One of the biggest prevailing concerns for Tilray as 2019 began was how the company would fare with its lock-up expiration approaching. For a period of 180 days following an IPO, insiders are legally disallowed from selling their shares. But when that 180-day period is over, which for Tilray was Jan. 15, 2019, it meant that tens of millions of shares could potentially be sold by insiders. Even though Privateer Holdings announced its intent not to sell any of its stake until the second half of 2019, at the earliest, moving 75 million shares at any point in the future was never going to be easy. In other words, Privateer’s eventual selling of these shares was…

Continue reading at THE MOTLEY FOOL

Leave a Reply

Your email address will not be published. Required fields are marked *