Markets

Why Marijuana Stock Tilray Jumped 22.5% in June

What happened

Shares of Tilray (NASDAQ: TLRY) popped more than 20% last month, according to data provided by S&P Global Market Intelligence, after it reached a deal to extend a lock-up period with its largest shareholder.

So what

The Canadian marijuana company signed a nonbinding letter of intent with private equity firm Privateer Holdings, which will extend the lock-up period for up to two years on the 75 million Tilray shares it owns.

As part of the deal, Tilray will acquire Privateer and merge it with one of its subsidiaries. All Tilray shares held by Privateer will be canceled, and Privateer stockholders will receive newly issued shares of Tilray stock subject to a lock-up that allows the shares to be sold only under certain conditions over a two-year period. Over the first year, the shares will be sold only to institutional and strategic investors at the sole discretion of Tilray. The remaining shares will be released from the lock-up on a staggered schedule during the second year following the closing of the merger.

"We appreciate the long-term confidence that Privateer has in the Tilray business and we look forward to having their investors as part of our stockholder base," Tilray CFO Mark Castaneda said in a press release. "We believe this transaction will give Tilray greater control and operating flexibility, while allowing us to effectively manage our public float."

A post with signs labeled "risk," "loss," and "profit."

Image source: Getty Images.

Now what

Privateer Holdings owns roughly 77% of Tilray's stock. If Privateer decided to exit its position, the additional supply of Tilray stock entering the marketplace could have pressured the cannabis producer's share price. With this risk now lessened, it's logical that investors bid up Tilray's stock price following the announcement of the deal in June.

Tilray can now focus its attention on expanding its international medical cannabis operations and its recently acquired Manitoba Harvest hemp foods business as it works toward reaching profitability in the year ahead.

Here's The Marijuana Stock You've Been Waiting For
A little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.

And make no mistake – it is coming.

Cannabis legalization is sweeping over North America – 10 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.

And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.

Because a game-changing deal just went down between the Ontario government and this powerhouse company...and you need to hear this story today if you have even considered investing in pot stocks.

Simply click here to get the full story now.

Learn more

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

TLRY

Latest Markets Videos

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More