By Max A. Cherney
Tilray's stock has been volatile since its July IPO, but it has supply agreements in 12 countries and a clinical trial in the U.S.
When Tilray Inc. became the first cannabis company to go public on a major U.S. exchange this year, it marked an important turning point for the sector -- as Chief Executive Brendan Kennedy told MarketWatch ( ), the successful IPO on the Nasdaq was a validation for the overall industry.
The cannabis producer , based on Vancouver Island, has a unique structure as compared with its Canadian competitors. The majority of voting shares are controlled by Privateer Holdings Inc., a venture-capital firm based in Seattle. Kennedy runs Privateer, which has extended credit and debt facilities of roughly $34 million to the company.
Tilray's stock () is a volatile one ( ). In large part that's because of the small float -- 17.8 million shares are available for trading, compared with rivals' share counts in the hundreds of millions -- and the fact that it's easier to bid a stock's price up or down when so few shares are available. The lockup will expire 180 days after its July 19 IPO, which will likely provide some relief. The stock is not suffering from a short squeeze ( ), however, as some have speculated.
In case you missed it:Tilray IPO: Five things to know about the first pot company to go public on Nasdaq ()
Tilray disclosed in its prospectus that it has filed three patents for cannabis processing technology, grinding tech, and formulation and treatment methods. The company also said that it has the exclusive rights to "at least" 22 issued or pending patents. Several of those are related to significantly shortening drying and curing times.
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"We believe our industry is ripe for innovation and that investments in innovation in partnership with established companies will differentiate us and position us to become a dominant leader in our industry over the long term," said the prospectus.
What business is Tilray in?
Like every Canadian business, Tilray has not yet brought in revenue or profit from recreational sales, but it is planning to move into that market with a range of brands and partnership agreements. At the moment, Tilray's sales are entirely composed of sales of medical cannabis either in Canada or overseas, where it has a substantial and growing footprint.
In Canada, Tilray says that its High Park farm in Ontario has agreements with the provinces of Quebec, Ontario, British Columbia, Manitoba, Nova Scotia, Prince Edward Island, Northwest Territories and Yukon for adult sales starting Oct. 17.
Beyond Canada, Tilray has a sizable and growing international footprint. At the time of its IPO, it had agreements with existing pharmaceutical distributors in 12 countries and ties to four clinical trials in three countries. Since the IPO, Tilray has announced a clinical trial in the U.S. for one of its cannabis-based capsules. It has a licensed production facility in Portugal and announced an acquisition of a Chile-based biotech company in October.
How much cannabis does it grow and at what cost?
During the June quarter, Tilray sold the equivalent of 1,514 kilograms of cannabis and harvested 1,461 kilograms, up from 769 kilograms and 1,760 kilograms in the year-earlier period. The company sold the pot for an average of $6.38 per gram, up 3% from last year's comparable quarter, and costs rose 18% to $3.33 per gram. For the first six months of the year, Tilray harvested 3,154 kilograms of pot and sold 2,813 kilograms.
Those pot sales resulted in quarterly revenue of $9.7 million and a loss of $12.8 million; in the prior year's comparable quarter, Tilray banked sales of $5 million and a loss of $2.4 million.
How much cannabis can it eventually grow?
Tilray says that its total production space by the end of 2018 will be 912,000 square feet. It started the year with about 60,000 square feet under cultivation. Given the amount of land the company currently owns, Tilray has said it expects to be able eventually to bring a total of 3.8 million square feet under cultivation.
Tilray's stock has gained 45% in the past month, while the S&P 500has fallen 5% and the Dow Jones Industrial Averagehas lost 3%.
-Max A. Cherney; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
October 20, 2018 11:21 ET (15:21 GMT)
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