One of the biggest names in the cannabis industry will be merging with their biggest shareholder.
Tilray (NASDAQ: TLRY) announced today that they are planning a complex agreement with Privateer Holdings, their top investor and shareholder, that would see the latter acquire the former, merging and becoming a shell entity in the process.
The markets saw this as proof that Tilray was at an attractive price as demand surged, with the stock jumping almost 15 percent during the first few hours of the day.
Privateer as a company will cease to exist, becoming essentially a shell company as Privateer stockholders get compensated in new common stock of Tilray.
Privateer was one of the earliest and largest investors in Tilray, and after the cannabis company went public, Privateer’s decision to not sell their stake after the lock-up agreement ended was a major positive sign for the market.
As the stock has continued to fall and cheapen in the process, Privateer has decided to go ahead and merge with the cannabis company, with a new lock-up agreement restricting 77 percent of Tilray’s total share outstanding to a two-year contract.
Mark Castaneda, Chief Financial Officer of Tilray, said that “We appreciate the long-term confidence that Privateer has in the Tilray business and we look forward to having their investors as part of our stockholder base. We believe this transaction will give Tilray greater control and operating flexibility, while allowing us to effectively manage our public float.” Michael Blue, a Managing Partner of Privateer, added that “We believe this structure will maximize overall returns for our visionary investors in a tax-efficient manner while giving Tilray the operating flexibility it needs to continue to be a leader in the rapidly emerging global cannabis industry.”
At the same time, the company plans to do a staggered release during the second year of all locked up shares in an effort to prevent a massive flood of the company’s stock diluting prices too much.
Shares of Tilray surged over 11 percent on Monday in response to the news, making it one of the best single days for the company in the year so far. Tilray might be one of the few cannabis companies which didn’t see a recovery in Q1 2019, with the stock remaining virtually the same before slowly but steadily declining over the past couple of months.
Analysts have previously considered Tilray to be one of the most overvalued stocks in the cannabis industry, at one-point spiking to over $200 per share in 2018. Now this is no longer the case, as shares ended the day at $43.14 per share, a substantial discount from before. Many are already saying that Tilray is a buy at its current price.
Tilray Company Profile
Tilray Inc is engaged in the sale and development of medical cannabis. Geographically, the company derives the majority of its revenue from Canada. The product categories of the company include dried cannabis which includes whole flower and ground flower, and cannabis extract which include full spectrum and purified oil drops and capsules. – Warrior Trading News
