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Tilray Inc (NASDAQ:TLRY) Weakens Further Despite Alef Move

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In our last piece on Tilray Inc (NASDAQ:TLRY), we said we thought this was a bad stock that would be headed lower. It has declined about $30/share since then. The latest drop comes despite the company’s announcement that it has completed an acquisition of its existing import and distribution partner Alef Biotechnology SpA.

According to the releaes, “The acquisition will allow Tilray to import, produce and distribute Tilray branded medical cannabis products in Chile and to create a hub to distribute Tilray products throughout Latin America. Tilray purchased all the outstanding equity of Alef for approximately C$5,000,000 (Canadian dollars). The purchase was comprised of approximately C$250,000 in cash paid at closing, and C$4,750,000 in Tilray Class 2 common stock, subject to a standard working capital adjustment and Alef achieving certain business milestones within a twelve-month period after closing.”

Tilray Inc (NASDAQ:TLRY) engages in the research, cultivation, processing, and distribution of medical cannabis.

The company offers its products in Argentina, Australia, Canada, Chile, Croatia, Cyprus, the Czech Republic, Germany, New Zealand, and South Africa. Tilray, Inc. was incorporated in 2018 and is headquartered in Nanaimo, Canada.

According to the company’s IPO announcement, “Tilray, Inc., a vertically-integrated and federally-licensed cannabis cultivator, processor and distributor, today announced the pricing of its initial public offering of 9,000,000 shares of Class 2 common stock. 6,524,000 shares of Class 2 common stock will be offered in the United States and certain other countries except Canada at a price to the public of US$17.00 per share for a total offering size of US$110,908,000 and 2,476,000 shares of Class 2 common stock, which we refer to as Subordinate Voting Shares, will be offered in Canada and certain other countries except the United States at a price to the public of CAD$22.451 per share for a total offering size of CAD$55,586,200. Based on current exchange rate1, the total combined offering size is approximately US$153,000,000.00.”

One of its key subsidiaries is High Park, which was launched to produce and distribute world-class cannabis brands and products for the Canadian market. Based in Toronto and led by a team with deep experience in cannabis and global consumer brands, High Park has secured the exclusive rights to produce and distribute a broad-based portfolio of cannabis brands and products in Canada, subject to applicable laws and regulations.

In addition, High Park has developed new brands and products for the Canadian market. Upon the coming into force of federal legalization of cannabis for adult-use and corresponding provincial legislation, High Park anticipates fulfilling adult-use supply agreements and purchase orders in Quebec, Ontario, British Columbia, Manitoba, Nova Scotia, Prince Edward Island, Northwest Territories and Yukon on October 17, 2018.

 

The Storm Before the Calm

In our section above, we noted that TLRY just announced that it has completed an acquisition of its existing import and distribution partner Alef Biotechnology SpA. While this is far from market-moving news, we would note that the stock got hit badly on it, dropping nearly 8%.

We would suggest that this is another sign of the stock’s inability to sustain its current pricing, especially with the prospect of Aurora Cannabis now possibly moving toward an NYSE IPO before long.

Nonetheless, from a birds-eye view, shares of the stock are still up about 35% over the past month, despite being up and down more than that in a week for most weeks of that roller coaster month.

“Today’s announcement marks another milestone for Tilray as we expand our global footprint and solidify our presence in Latin America by officially welcoming Alef to the Tilray team,” said Brendan Kennedy, President and Chief Executive Officer of Tilray. “The Chilean government has been a pioneer legitimizing and regulating medical cannabis in Latin America, and we are thrilled to be investing in one of the region’s most exciting markets for biopharmaceutical development.”

Tilray Inc (NASDAQ:TLRY) pulled in sales of $9.7M in its last reported quarterly financials, representing top line growth of 24.8%. However, the company is battling some balance sheet hurdles, with cash levels of 25.3M struggling to keep up with current liabilities at $62.8M.

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