Tilray Inc (NASDAQ:TLRY) emerged as one of the bigger players in the cannabis industry. Back in June, after the company went up in trading by more than 20% in the month. Much of the influx is due to the agreement of a lock-up period with the company’s biggest shareholder. The possibility of the biggest shareholder in a company dumping millions of shares in the market is never a good thing for any company. Though this particular development definitely gives Tilray’s management a bit of breathing space. Investors do not like any uncertainty of that nature and when such a problem is managed for the foreseeable future, it is almost always reflected in a company’s stock price.
Tilray’s biggest shareholder is Privateer Holdings, a private equity firm and it holds as many as 75 million shares of the company. However, according to the terms of the deal, the firm will be taken over by Tilray and then merged with a subsidiary. The shares held by Privateer are all going to be canceled by Tilray and fresh shares are going to be issued. However, it is important to note that the newly issued shares can only be sold under specific conditions during the lock-in period of two years.
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There are more important aspects with regards to this deal that will further take care of Tilray’s long term interests. The shares that are under lock could be released but only in private placements to institutional investors. Any residual shares will be released in a staged manner in the second year. The deal made by Tilray will give it greater control over the company’s future and its stock price. Mark Castaneda, the Chief Financial Officer of Tilray, stated, “We believe this transaction will give Tilray greater control and operating flexibility while allowing us to effectively manage our public float.”
Tilray’s stock is one of the top popular marijuana stocks in the cannabis sector due to its wild move in the stock price last year. After the listing in July last year, this pot stock had soared all the way to $300 by early October – that’s an 1000% rise in about 3 months. However, the stock didn’t hold well and peaked out in Octobers fell back to $70 by the end of the last year. So far this year, TLRY’s stock is down 35%. However, the stock is still 50% since its listing at around $30.
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