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WALL STREET SMELLS THE SMOKE


Tilray Inc., the Canada-based marijuana farming has walked the walk to Wall Street and raised $157 million in its IPO and becomes the first company to raise capital on debut a Nasdaq listing. Under the symbol TLRY and priced at $17 a share, trading began on July 19th. The largest insider is venture-capital firm, Privateer Holdings Inc. with a sole focus on the marijuana industry will capitalize a $400,000 investment into over $3.7 billion in paper profits.

Marijuana remains a dubious and complicated regulatory issue in the U.S., while Canada is the first industrialized country to legalize recreational cannabis. Institutional money has embraced Canada since 2012 and remains the significant capital forced with an estimated $2.7 billion on the line and a projected market value of over $250 billion. As America stock exchanges accept listings, cannabis industry’s legality will make it easier to convert investments into hard dollars. Indeed, TLRY is a classic example of arising $157 million and creating a market value as a public company of $7.2 billion. On paper, TLRY lacks fundamental qualities. In the first quarter of this year, TLRY had a net loss of $5.2 million on sales of $7.8 million, versus $679,000 in losses and revenue of $5 million in the year-earlier period. In the first quarter of 2018, TLRY farmed 1700 kilos of cannabis and sold 1300 kilos with a net selling price per gram of $5.94, while costs of production were $2.81. As for 2017, TLRY had sales of $20.5 million and a net loss of $7.8 million.

Bottom line – TLRY is a long-term play as investors and others in the cannabis industry are betting the U.S. will ultimately modify its federal laws to legalize the drug. Up to that point, it’s essential to invest in the right rabbit-hole as Wall Street smoke gets sweet and thick.

Note: According to the United Nations, the global cannabis market, including the illicit market, is estimated to be $150 billion, annually, and approximately 3.8% of the adult population, or over 180 million people, are estimated to be cannabis users. Although cannabis is still heavily regulated, medical use is now authorized at the national or federal level in 29 countries. The pace of regulatory change globally has been rapid, with more than 25 countries have introduced significant reforms to their cannabis use laws since 2015.


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