Stock of Tilray, Inc. TLRY rallied 19.4% following the news that its largest investor, Privateer Holdings will not sell its shares in the marijuana company in the first half of 2019. Notably, Tilray gained 328.7% in the past six months, against the industry 's decline of 11.4%.
Led by venture capitalist Peter Thiel, Privateer Holdings is a private equity company and one of the largest investors of Tilray.
We note that the company completed its IPO, selling 10,350,000 shares of Class 2 common stock at $17 per share (C$22.45 per share), and obtained net proceeds of $163.6 million after deducting the underwriting discount in July 2018. In February 2018, Tilray completed a recapitalization, in which the company issued 75,000,000 shares of Class 1 common stock to Privateer Holdings in exchange for the net assets of Decatur Holdings, BV.
In connection with the IPO, Privateer Holdings voluntarily converted 58,333,333 shares if its Class 1 common stock into shares of Class 2 common stock.
Since the initial lock-up period of six months in connection with the IPO is set to expire shortly, a sell-off was expected resulting in a decline in share price.
Tilray produces medical cannabis in Canada and Europe. The company is a global pioneer in the research, cultivation, production and distribution of medical cannabis and cannabinoids. Tilray was the first licensed producer of medical cannabis in the world to have its facility Good Manufacturing Practices (GMP) certified in accordance with European Medicine Agency (EMA) standards.
The company has two product categories - dried cannabis, which includes whole and ground flowers; and cannabis extracts, which includes full-spectrum and purified oil drops and capsules.
In October 2018, Canada became the first G7 country and the second country in the world to legalize cannabis sales for adult recreational use. This, in turn, should propel sales. Medical cannabis is now authorized at the national or federal level in 29 countries. Although the legal market for medical cannabis is still in its early stages, it represents huge potential.
Meanwhile, Tilray has been working strategically to broaden its global footprint. In September 2018, the U.S. Drug Enforcement Administration (DEA) approved an import pharmaceutical-grade medical cannabis product produced by Tilray in the United States, for a clinical trial focused on a neurological movement disorder, Essential Tremor (ET).
Last month, Tilray announced that its subsidiary, Tilray Canada Ltd. has entered into a global framework agreement with generic arm of Novartis NVS , Sandoz AG, expanding the current collaboration. Under the new agreement, Tilray will collaborate with Sandoz to increase the availability of high-quality medical cannabis products across the world.
Also, Sandoz will support the commercialization and supply of Tilray's cannabis non-smokable/non-combustible products for medical use globally. Both companies already had collaborated for supply of medical cannabis products in Canada, signed earlier in March.
Sandoz is one of the largest generic and biosimilar manufacturer with a worldwide presence. This latest collaboration will help Tilray use Sandoz's supply experience and infrastructure for faster penetration of its products.
The company also strengthened its presence in Latin America with the acquisition of Alef Biotechnology. The acquisition will allow Tilray to import, produce and distribute Tilray branded medical cannabis products in Chile, and create a hub to distribute its products across Latin America.
The company recently entered into a research partnership with world's leading brewer, Anheuser-Busch InBev SA/NV BUD to research non-alcohol beverages containing tetrahydrocannabinol (THC) and cannabidiol (CBD). Shares surged on this news.
The cannabis space is grabbing headlines of late. Canopy Growth Corp. CGC and Cronos Group CRON are among the other companies that primarily focus on cannabis products.
Tilray currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
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