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Tilray, a Canadian cannabis producer earning losses with less than $ 10 million in sales in the last quarter, reached a market capitalization of $ 20 billion on Wednesday in a volatile trading day.
Shares of the company soared as some investors became excited about the prospects for the cannabis industry, while others expressed deep skepticism about Tilray's dramatic valuation. Shortseller Citron Research on Wednesday called its recent gains "beyond understanding".
The low float of stocks available for trading in the company and the popularity of cannabis-traded exchange-traded funds only amplified the effect of these conflicting forces.
The stock, which had been valued at $ 17 in an initial Nasdaq public offering two months ago, was reduced to $ 300 in the middle of the afternoon in New York on Wednesday. The day before, the news had indicated that Tilray had received approval from the US Drug Enforcement Administration to import a capsule form of one of its products into a clinical trial to treat a neurological disorder called essential tremor.
An hour of swings and trade suspensions dropped the price just below Tuesday night's closing, before rebounding to end the day up 38% to $ 214.06, marking his third day of gains.
Brendan Kennedy, chief executive, told the FT that Tilray would be one of the "multi-billion dollar companies" in the cannabis business on time, but added that investors should not neglect
"It looks like we have been added to the financial indices and ETFs are rebalancing, they have to buy shares," he said. Most of Tilray's shares are held by Privateer, a private equity group backed by Peter Thiel, leaving only about 10 million shares available for purchase. "ETFs are now making this real floating even smaller," Kennedy said.
According to Bloomberg, 30 million shares of Tilray were traded on Wednesday.
Tilray was added to the ETFMG Alternative Harvest ETF on August 1, doubling assets under management in the past month to more than $ 600 million, a spokeswoman said.
Tilray is not currently part of Horizons Marijuana Life Sciences, a more than $ 1 billion ETF traded in Toronto, but on September 12, the company was added to the Solactive index that Horizons Fund is funding. The ETF rebalances quarterly, which would indicate that Tilray should enter.
Tilray was added to the FTSE US Total Market Index Series on Aug. 20 and the FTSE Renaissance Global IPO Index the day after its market launch on July 19. Tilray is not part of any MSCI index. The S & P Dow Jones indexes did not respond to calls for comment.
Cannabis bulls have also been boosted by recent transactions by mainstream brand owners, including beer maker Corona Constellation Brands, which is investing $ 4 billion to increase its stake in Canopy Growth.
"Everything should go along with that," said Sean Stiefel, Portfolio Manager at Navy Capital. "However, it went well beyond the fundamentals and turned into this retail business [investor] mania. Everyone and their mother, including my mother, ask questions about Tilray.
In addition to the Constellation agreement, Coca-Cola said this week that it is reviewing the market for cannabis-related products and has had talks with Canadian group Aurora Cannabis to develop beverages. The manufacturer of Johnnie Walker, Diageo, has explored in recent weeks investment opportunities in the sector, according to relatives of the company.
Tilray also attracts attention because it was the first IPO pot company in the United States. Canopy and Cronos Group became public in Canada and then made two registrations in the United States.
Mr. Stiefel bought Tilray during its IPO, but has since sold its shares and bought put options, which offers an option to sell shares at a lower price. He expects stocks to fall because the company has to raise funds.
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Kennedy declined to comment on whether Tilray would pursue an offer of stock following its IPO in July, but said the company "should consider the possibilities of raising additional capital."
The product of the IPO was intended to fund an expansion plan to increase its production space from approximately 60,000 square feet to approximately 912,000 square feet, as well as repayment of the debt, working capital and acquisitions, according to public deposits.
"It is clear that there are different expectations today 60 days ago and we must act accordingly," Kennedy said. "We have evolved quickly."
The company has made a multi-billion dollar valuation despite a net loss of $ 7.8 million on a turnover of only $ 20.5 million in 2017.
On Wednesday morning, in a tweet, Citron Research called the Tilray price movement "beyond understanding". He added, "Nobody needs a market expert to explain that. This is only the dynamics of the stock trading at low float. Yes, we are short and will occupy a manageable position until rationality installs itself. "
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