Tilray, Inc. (Nasdaq: TLRY) is a Canadian based medical marijuana provider that just started trading on the Nasdaq with an Introductory Public Offering, making it a first of its kind. 6.254 million shares sold at $17/share raising over $106 million for the company right out of the gate. There is another 2.476 million shares that are being offered in other countries exclusively, such as Canada. Tilray joins Canopy Growth Corporation (NYSE: CGC) and Cronos Group (CRON) as the first three cannabis companies to be traded on major U.S. exchanges.
Tilray is a major player in the cannabis industry with exporting contracts in Germany, Australia, Chile, Argentina, the Czech Republic along with five other countries. Investors certainly seem to think they are a major player as the stock leapt to over $23/share this morning representing an over 36% increase. It has settled back to the $21 – $22 range after the early enthusiasm began to slow. Tilray had expected its IPO to be between $14 & $16 a share, so the company must be pleased so far by its results.
Most cannabis companies enter into the market through a reverse merger to avoid a lot of the challenges of having an IPO, which makes Tilray unique and appealing to investors. The cannabis giant plans to use these funds from its IPO to fund its overseas plans, particularly in Europe where medical cannabis is very popular, in particular in countries like Germany. It is likely to use some of these funds tor acquisitions and other investments as well, but Tilray’s plans to expand its cultivating space to 886,000 square feet worldwide is likely its priority. Tilray’s largest competitor, Canopy Growth Corporation plans to expand its cultivating space 5 million square feet by the end of 2019.
One of the more interesting aspects of Tilray is that Cowen and BMO, two massive banking institutions, are the book-runners for the IPO. Banks seem to be getting more comfortable working with cannabis companies as of late despite the federally illegal status of cannabis. A roll back of the Cole Memo at the beginning of the year scared many banks, but since then they seem to be warming back up to cannabis companies. According to New Frontier Data, the amount of banks working with cannabis companies has increased by 29% from 2016 to March of this year.
Cannabis stocks in general have not had a great year along with the rest of the market. Consolidation periods this long can be very concerning to investors that fear that it may represent a peak, especially after the market has reached all-time highs. Regardless, the cannabis industry has been a long time in coming and so pioneers in the industry are not going to wait for another opportunity over fears their share value may fall.
With Canada planning to start is adult-use market this October after the Senate passed the Cannabis Act, investors and consumers alike are excited about the potential demand for recreational marijuana. Tilray is likely to enter into the adult-use market, however right now their focus remains on the medical marijuana industry.