Tilray (TLRY) is currently priced at $77 a share after reaching $104 and change earlier this month. Part of the reason why the stock has taken a beating across the past three weeks is the fact that insiders were finally permitted to sell their shares following the IPO’s lockup period. A considerable number of company executives and other insiders sold the stock to take some profits off the table.
Let’s take a quick look at whether Tilray’s current price provides a money-making opportunity for investors.
Tilray is a marijuana producer based in Canada, which has legalized recreational marijuana. It appears as though the marijuana legalization movement is spreading across the United States and beyond. According to New York Governor Andrew Cuomo, citizens across the Empire State will soon be able to enjoy marijuana without a medical script. If marijuana goes mainstream in the United States, companies like Tilray are perfectly positioned to rake in the revenue.
Insiders’ willingness to sell should raise some red flags, yet this is not a major case for concern. Most of those who get in at the ground level on an IPO are tempted to unload some or all of their shares after the lockup periods end. The truth is Tilray’s sell-off could have been significantly worse, considering the fact that insiders were permitted to sell all of their stock. It is interesting to note Privateer Holdings owns more than slightly three-quarters of Tilray shares. Current Tilray investors as well as prospective investors will be happy to find out Privateer Holdings will not sell any of its shares across the first six months of the year. Insiders still hold about 11 percent of Tilray shares, leaving about 13 percent of the company’s total shares available to the general investing public.
Those especially concerned about Tilray’s sell-off will be relieved to learn the company recently announced a deal that enhances its prospects for the long-term. Tilray inked a revenue-sharing contract with Authentic Brands Group for the distribution and marketing of marijuana products. This is quite the important relationship as ABG has designated Tilray as its selected cannabinoid supplier. All in all, Tilray will have the rights to nearly half of all revenue stemming from Authentic Brands Group’s cannabis products. Tilray paid $100 million to land the deal along with $250 million more provided in the form of shares of stock and cash.
Prospective Tilray investors should be aware of the fact that the stock is extremely volatile. Though investors sold some shares this January, they still own the majority of the company. Some analysts predict Privateer Holdings will sell some of its shares after the first half of the year winds down. If Privateer unloads Tilray, the stock will almost certainly decrease.
Investor should pay close attention to how the company responds to its current slate of opportunities. Tilray is poised to make boatloads of money following the legalization of recreational marijuana in Canada. Furthermore, attitudes toward marijuana are becoming more liberal around the globe. There is a good chance Tilray will enjoy success in each of these markets, making the fallout from the lockup period expiration sale inconsequential across posterity.
Hold this stock until the summer. If it appears Privateer Holdings and other insiders are losing faith in the company and willing to unload a considerable amount of shares, sell. Investors who are skittish to invest in Tilray will be interested to learn the company’s production capacity is less than that of competing companies with comparably low market caps.
Furthermore, the company’s competitors scored widely heralded deals with top companies outside of the marijuana industry. Though Tilray has a deal in place with AB InBev to sell cannabis-infused drinks, this deal pales in comparison to those inked by its rivals. Prospective investors should pay close attention to the news with a particular focus on the competition between Canadian marijuana businesses. If the current trend continues and marijuana becomes legalized for recreational and medicinal purposes, Tilray will continue to expand and possibly become a true power player in the marijuana industry across North American and possibly beyond.