Tilray Stock Slumps Despite Merger Pact with a Key Shareholder

Tilray stock

Tilray stock is moving lower despite the news that Tilray (NASDAQ:TLRY) inked a merger agreement with top stockholder Privateer Holdings.

Important News for Shareholders

The past few months have not been particularly great for most of the companies in the cannabis space, and almost all companies have seen their stock prices drop considerably from the highs of January–February. The downturn did not spare Tilray stock either, which experienced a significant drop in its share price during this period.

However, the company made a significant announcement today that will definitely clear some of the uncertainty around the stock for the time being. Tilray announced that it had reached a definitive agreement with Privateer Holdings, the biggest shareholder in the company, for a merger. The two parties have also agreed to stretch the lock-up period of shares to two years.

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In addition to that, as many as 75 million shares in Tilray are going to be issued to Privateer shareholders. However, that is not all. It has also been decided that a downstream merger is going to take place, which will see Privateer merging with a subsidiary of Tilray. Tilray will have complete ownership of the said subsidiary. Privateer was the main financial backer of the company prior to its public listing back in June 2018.

Following the news, Tilray stock fell as much as 4.50% to $30.65 in late morning trade.

Analysts are Not Bullish

While it is true that the company has had a bit of a tough time over the recent months, it needs to be pointed out that many analysts are still bullish on the prospects of the TLRY stock. An analyst at Cowen recently revised its target price on Tilray stock from $150 to $60, but it needs to be pointed out that even climbing to the revised target would reflect a handsome return for most investors.

On the other hand, the company has generated solid growth in its most recent quarter. Total sales rose by an impressive 371% year-on-year to hit $45.9 million, and if it continues in the same vein, then there might be a good value for Tilray stock investors.

What do you think?

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