Weed Stock Tilray jumps 19% - for an even more overvalued appearance

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The pot producer's stock
Tilray

On the rise Friday, after the private equity firm who is the majority shareholder of the company announced that she would not sell stock when the blocking of the IPO of Tilray will expire on Tuesday, January 15th. The stock of the cannabis company had been overshadowed by fears of a potential sale of securities by Privateer Holdings, a Seattle-based private equity firm, backed by billionaire investor Peter Thiel, whose executives include Tilray's CEO, Brendan Kennedy.
At Friday's closing, the Tilray share (ticker symbol: TLRY) had traded five times its recent average daily trading volume, up 19% to $ 96.

"Privateer Holdings believes strongly in Tilray's long-term global growth strategy and the pioneering role in the future of the legal cannabis industry," said Michael Blue, Managing Partner of Privateer, in a brief public statement. He added that Privateer did not plan to sell shares in the first half of 2019.

Privateer owns 77% of the outstanding shares of Tilray, based in Nanaimo, British Columbia. The private equity firm says it has raised about $ 200 million to invest in cannabis companies such as Tilray. Until here everything is fine. The $ 40 million that Tilray claims to have been spent by Privateer on its stake now stands at $ 7 billion, not counting Privateer's absolute control over the pot producer.

"When we decide to distribute shares," said Mr. Blue, "we will do so in a methodical and deliberate manner to maximize tax efficiency considerations for Privateer investors, while taking into account the potential impact on the free float. of Tilray. "

The US investment bank
Cowen

(COWN) was Tilray's banker when the cannabis company went public at $ 17 a share in July, and the transfer of the shares brought Banker's share of Tilray to $ 17 million. The bet costs about a million dollars in Cowen.
Although Tilray's volatile shares are well below the peak of USD 300 reached when a Bitcoin-like frenzy seized the cannabis sector in September, Tilray's shares and rivals such as
Cover growth

(CGC) and
Aurora Cannabis

(ACB) have been rising for several days. Analysts Piper Jaffray and Cowen have teamed up with Canopy and Tilray this week, with bullish recommendations that producers overcome production problems that have caused shortages since Canada began selling recreational jars on May 17. October. Most cannabis stocks fell by half. the bad vibrations that result.
The bull Tilray must make vertiginous projections to be able to recommend the stock here. With a market capitalization of nearly $ 9 billion, Tilray is valued at more than 200 times the annualized sales of the company's unprofitable quarter.
And the price of the pot drops quickly. Friday, rival
Aphria

(APHA) stated that its gross margins decreased as its average selling price per kilogram in Canada fell by 8% during its November quarter to CAD 6.54. In September, the average price of Tilray was C $ 7.98. Wholesalers from the Canadian provincial government told companies like Tilray that prices had yet to fall for legal sales to take a share of the marijuana black market.
But the small sellers probably took their bet out of the sector, after the liquidation of the month of December. Aphria also announced the resignation of its managing director, Vic Neufeld. The news triggered the cessation of hostilities by Quintessential Capital Management, a hedge fund whose critics tarnished Aphria's shares last month. Quintessential said it was heading for new projects.
Write to Bill Alpert at william.alpert@barrons.com