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Canadian cannabis grower Tilray became the first marijuana company to be launched on Nasdaq in July. Its original price of the action: $ 17. A month ago, its price had almost doubled to about $ 35. But in recent days, Tilray's stocks have skyrocketed after $ 200. The company is now worth more than $ 20 billion – more than American Airlines, Expedia and the pharmaceutical company Mylan.
So what does it give?
Based in Nanaimo, a city on Vancouver Island, Canada, Tilray, according to its website, is dedicated to "cultivating and offering the benefits of medical cannabis safely and reliably." Its revenues were only $ 20 million last year. Legalize marijuana in October, her business prospects have recently become much more attractive.
The big reason why stock prices have risen so much right now is not Canada, but rather the United States: the US Drug Enforcement Administration has just accepted Tilray's plan to import marijuana in the United States for medical research.
The company will work with the The Cannabis Research Center at the University of California at San Diego is studying the effectiveness of the drug in the treatment of essential tremors, a neurological movement disorder.
In turn, Wall Street seems to have caught Tilray fever. DEA's announcement resulted in a nearly 30% increase in US-listed shares in Tilray on Tuesday, and Tilray surpassed Canopy Growth as the most valuable publicly traded company.
"Tilray is the closest thing to being able to be [invested] cannabis industry in the most liquid market in the world, and that's why we're seeing value in the current marketplace, "said Leslie Bocskor, president of Electrum Partners, a consulting firm specializing in cannabis.
This does not mean that investors would be well advised to jump on the Tilray train now.
Pop in the course of action Tilray – more than 1,000 percent since its IPO in July – might not be sustainable. Pot stocks are notoriously volatile, and it is obvious that many investors are bypassing Tilray's shares, or betting against it.
Currently, a limited number of publicly traded Tilray shares are available to investors, with most shares of the company still owned by Privateer Holdings, a private equity firm backed by investor Peter Thiel. In January 2019, private shareholders will be able to sell their shares to the public, which means that many shares could hit the market and lower the price of Tilray's shares.
"This has created the problem of supply and demand where the stock is skyrocketing, and you just can not let it go. All of this will change once new stocks come on the market, "says Jason Spatafora, who runs MarijuanaStocks.com and tweets under the name @WolfOfWeedSTI said. "It's total greed and irrational exuberance, and many people will end up hurting themselves."
Tilray could be the next Amazon. Or the next Pets.com.
The cannabis industry in the United States and Canada has grown considerably in recent years. Expenditures on legal cannabis globally are expected to reach $ 57 billion by 2027, the largest group of buyers being in North America.
But investing in cannabis remains precarious. In the United States, marijuana is still considered a Schedule 1 drug at the federal level, in the same way as heroin and LSD.
Some states have legalized it for recreational and medical purposes, but there is still a lot of detail to be sorted out, and the fact that the federal government can repress a cannabis company at any time makes it a risky investment. (Analysts often draw a line between companies that do not touch the product and those that do not touch it: those who do not touch marijuana, but who, for example, provide packaging, are generally safer investments .)
Most cannabis stocks are traded over-the-counter, not on large exchanges, such as the Nasdaq and the New York Stock Exchange. There are a few exceptions – Canopy Growth is listed on the New York Stock Exchange and Innovative Industrial Properties has gone public on the New York Stock Exchange, but it operates primarily in the real estate sector. And, of course, there is Tilray.
The investment bank Cowen bought Tilray in July at $ 17 a share and since then its share price has skyrocketed, especially in recent days. It is stronger than many publicly traded cannabis companies – according to Bloomberg, it has agreements to sell marijuana in Canadian pharmacies and focuses on medicinal marijuana in 12 countries. But it is also subject to some of the same problems as other publicly traded companies, including volatility: During Wednesday's morning trading, Tilray's stock price went from about an hour to about $ 230 to $ 180.
Bocskor said that "from a fundamental perspective" – as in the financial activities and core business of the company – there is "no justification" for Tilray's current valuation. But, he said, opponents and short sellers of the stock could be wrong, and it could be the Amazon of the cannabis industry. "From an evaluation point of view, from the point of view of investment, try to create a context. … Amazon is a very good point of reference, "he said. "Only time will tell."
It could also be the next Pets.com, which exploded during the Internet bubble.
Tilray's current rage has also led to comparisons with Bitcoin swings at the end of last year, when the price of cryptocurrency exploded to nearly $ 20,000. It is now trading in the $ 6,000 range. As Bloomberg's Lily Katz and Brandon Kochkodin point out, many crypto and bitcoin-related actions took off last year, as happened with Tilray.
"It's like supply and demand that pushed Bitcoin," Spatafora told me. "That's what it is, it's limited excess supply and demand."
Bocskor, who sits on the board of directors of several companies in the cannabis industry and has invested in it, is optimistic for the cannabis industry. Still, he said, ordinary investors should probably stay away for the moment.
"Small investors with only a few thousand dollars should not be invested in cannabis yet," he said. "It's not a good choice."
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