Tilray and the Privateer strike will release 75 million shares over the next two years

Tilray has reached an agreement with its majority shareholder, a fund guaranteed by Peter Thiel, to gradually sell the fund's stake over the next two years, the Canadian jar company announced.

The private investment fund Privateer Holdings, focused on cannabis, was created in 2013. It hosted external investors during private financing rounds and during an initial public offering last summer. . Privateer currently holds 75 million Tilray shares, or 77% of the total shares outstanding.

The short sellers have bet that Privateer would flood the market with Tilray shares, with 24.2% of the capital currently in the short term, according to FactSet. The agreement sets a timetable and conditions for the release of Privateer's stake over the next two years, which, Tilray hopes, will help clear the excess inventory.

Tilray will acquire Privateer as part of a downstream merger, disposing of Privateer's current ownership interest directly to the fund's investors as part of a duty-free transaction. In the first year following the transaction, the shares will be sold to institutional and strategic investors, as determined by Tilray. Remaining shares will be released in the second year at a phased rate.

"Privateer gives Tilray a lot of operational flexibility and obviously believes in the long-term value of this business and is not looking to sell its stock as quickly as possible, so it's a kind of mutual benefit for both parties." said Tilray. Chief Financial Officer Mark Castaneda said in an interview.

Tilray has entered into numerous partnerships, including with the brewing giant Anheuser-Busch InBev, the consumer and consumer brands conglomerate Authentic Brands Group and the pharmaceutical company Novartis. Meanwhile, some of its competitors have made significant investments with strategic investors. Constellation Brands, a liquor company, acquired a 38% stake in Canopy Growth last year, while tobacco giant Altria bought 45% of Cronos.

"Tilray and the cannabis industry are disrupting many industries, and all of these industries – the pharmaceutical industry, alcohol, consumer products, and tobacco – have any long-term interest in investing in Long term in this space, "Castaneda added that he did not expect the 75 million shares to be sold.