Canada-based cannabis company Tilray Inc (NASDAQ:TLRY) has been among the most popular cannabis stocks ever since it listed on Nasdaq back in 2018. TLRY stock has had a bit of a rollercoaster ride since its IPO, as it soared to a high of $300 barely two months after having listed for $17.
Tilray Stock Down 85% From All-Time High
However, TLRY stock has shed its gains considerably since this initial soar and is now trading at a price 85% lower than its all-time high. Tilray has faced a range of challenges over the past few months, but it seems that the company has been able to tackle one of those quite comprehensively.
For a long time, there had been a niggling worry among many that Privateer Holdings, Tilray Inc’s biggest shareholder with as many as 75 million shares to its name, could dump the stock and send TLRY price crashing. Privateer is a private equity firm and the Chief Executive Officer of Tilray, Brendan Kennedy, also happens to be its chairman. 75 million shares are equivalent to 77% of the company, and hence, it is no surprise that it remained a worrying issue. Insiders are allowed to sell their shares 180 days after an IPO and that deadline passed in January.
TLRY stock is up 7% at $41.67 in Monday’s session.
Privateer’s News is a Key Trigger
However, on June 10, Tilray Inc announced that it was in the process of acquiring Privateer Holdings, and following the acquisition, Privateer’s TLRY stock will be sold in a staged manner.
This is a significant development since it frees up the company from the uncertainty caused by the possibility of an insider dumping millions of shares. That being said, there are other issues revolving around Tilray, and one of those is its decision to no longer invest in the Canadian market, and instead try to enter the United States market through hemp. Additionally, the company also seeks to foray into Europe due to the growing medical cannabis market in that continent.
Now, expansion into the United States and Europe is a smart move, considering the fact that many other cannabis companies are doing the same. However, Tilray Inc has decided to stand still in Canada despite the fact that cannabis has been legalized in the country. Moreover, the company has not been raising its production capabilities either and produces only 100,000 kilos of cannabis a year.
Moreover, Tilray’s limited production capability has forced it to buy cannabis from third parties. Perhaps that is one of the major reasons why its gross margin stood at only 23% in the first quarter. The expansion into new markets means that the company’s costs will be higher this year, and hence, it is unlikely that Tilray will be able to generate a profit in 2020.
So far this year, TLRY stock has fallen 40%. Moreover, the stock is down 60% from its mid-January highs.
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