Cannabis stocks: What you need to know about Tilray’s IPO on the Nasdaq

Canadian medical marijuana company Tilray began trading on the Nasdaq on Thursday, making it the first cannabis business to go public on a major U.S. exchange via an initial public offering (IPO).

One of the larger cannabis companies in Canada, Tilray plans to list on the Nasdaq Global Select Market under the ticker symbol TLRY. Here’s a quick breakdown of what investors need to know:

Tilray’s IPO terms, company control

The British Columbia-based company, owned by Seattle private equity firm Privateer Holdings,  has issued 9 million shares of its common stock priced at $17 (CA$22.50) a share.

That’s above the firm’s previously stated range of $14-$16 “due to demand from large U.S. and global institutional investors,” company spokesman Zack Hutson told Marijuana Business Daily.

That boosted the IPOs offering size from $144 million to $153 million, according to the firm.

The company does not plan to list on a Canadian stock exchange.

After the IPO, Tilray will be considered a controlled company – meaning Privateer Holdings will continue to control a majority of the voting power.

That’s because Tilray is offering investors its Class 2 stock, which carries one vote per share. Privateer owns 75 million Class 1 shares, which command three votes per share, according to U.S. Securities and Exchange Commission.

Tilray’s business and financials

The company, which sells cannabis in 10 countries, is on pace to have as much as 912,000 square feet of production space by the end of the year, according to SEC filings.

Those filings also laid out the firm’s plans for the net proceeds of the offering, which include:

  • About $52.9 million to fund the build-out of cultivation and processing capacity.
  • Roughly $37 million to repay outstanding principal and interest under the Privateer Holdings debt facilities used for working capital and general corporate purposes.
  • The remainder will be used for working capital, future acquisitions and general corporate purposes.

The company reported a net loss of $7.7 million in 2017 on revenue of roughly $20.5 million.

The firm’s 2017 revenue represented a more than 62% spike from 2016, when the company recorded $12.5 million in sales.

IPO versus direct listing

Tilray’s filing comes just four months after Cronos Group, an Ontario-based cannabis company, began trading on the Nasdaq (CRON) and Canopy Growth, also based in Ontario, announced plans to list on the New York Stock Exchange – although those were direct exchange listings and not IPOs.

IPOs are costlier to pursue than direct listings, but they’re considered by investors to carry less risk because they use underwriters that often agree to buy a guaranteed allotment of shares to sell to their investor networks.

Cowen and BMO Capital Markets are jointly acting as bookrunners for Tilray’s IPO. Cowen is the sole bookrunning manager for the IPO in the United States and BMO Capital Markets in Canada, according to a Tilray news release.

Roth Capital Partners is the lead manager and Northland Capital Markets is a co-manager for the IPO in the United States. Eight Capital will act as the lead manager for the IPO in Canada.

Lisa Bernard-Kuhn can be reached at [email protected]

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