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Tilray Inc. chief executive, Brendan Kennedy, said Tuesday night that the cannabis producer would have sold a lot more weeds if Canadian producers had not lied about the amount of potion they could actually cultivate.
Tilray
TLRY, + 4.88%
announced quarterly results Tuesday afternoon and sales continued to grow more slowly than expected many investors. Kennedy said that while there is a widespread prediction of an overabundance of cannabis supply in Canada, this has not proven to be the case. In fact, Tilray continues to have difficulty sourcing enough high-quality marijuana, and Kennedy believes that supply problems will remain a problem in Canada for the next 18 to 24 months.
The reason: the suppliers that Tilray was to source from were not able to produce the necessary cannabis, despite the promises made before the legalization they used before to present themselves to partners and investors.
"Some of them were lying about their financing capacity," Kennedy said in a telephone interview with MarketWatch, adding that public companies exaggerated this parameter because investors had based their assessment on that outcome.
As the cannabis industry matured, investors were using a set of evolving parameters that went beyond revenues or profits to value producers – largely because recreational sales could not take place legally in Canada before October 17 of last year. A popular measure used by analysts and companies was "financing capacity," a figure that referred to the amount of growth capacity that a company had to its credit without requiring an additional capital increase.
However, in many cases, the capacity of Canadian public companies was theoretical and they have not yet been able to produce cannabis on this scale.
"If I could go back 18 months ago, 12 months ago, I would have invested an additional $ 100 million in Canadian culture," Kennedy said in a conference call with investors on Tuesday. evening. "It was one – it was a mistake. But we believed, we believed all the hype of 18 months ago. "
Cannabis Watch: All Cannabis Business Coverage by MarketWatch
According to several sources in the cannabis industry, funded capacities have been widely used through Supreme Cannabis Co. Inc.
FIRE, -1.01%
SPRWF, -0.68%
frames. Although Supreme helped to usher in the use of funded capacity, dozens of other public cannabis companies have adopted it for their own purposes.
Last year, Supreme Cannabis CEO Nav Dhaliwal told MarketWatch that in 2016 pot producers were evaluated based on the number of patients they could claim. Prior to that, according to Kennedy, Canadian pottery companies had valuations based on the secure safes that they had built.
For Supreme, the use of patients was a problem because he did not have them at the time, but he needed a way to describe and value his activity for investors. As a result, Dhaliwal said it has developed a new method of valuing cannabis companies: funded capacity.
"In talking to analysts, investors and bankers, we said we would strengthen this capacity in terms of funding," he said in a telephone interview in November.
However, Dhaliwal also said that the industry was evolving and that this number was not meant to be relevant to investors or cannabis growers in the long run, and that it is overused today. hui.
"The funded capacity is too widely accepted as a metric," Dhaliwal said at the time. "It's relevant, it's a fundamental step. But once you start scaling, it becomes less relevant. "
Tilray shares rose 4% in the broad session on Tuesday after the release of the first quarter results, but fell 37% in the last three months.
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