TLRY: Will Tilray (TLRY) Rebound From All-time Lows?

It has been a slippery slope for Tilray (TLRY) ever since the stock hit $300 per share back in 2018.

So far this week, TLRY has plunged more than 25%, trading under $2.50 per share. This marks a 99% decline in share price from its peak of $300 in less than two years. This goes to show how badly valuations in the cannabis sector were blown out of proportion during the tremendous rally in 2018. As we continue to see the fallout almost two years later, there are some valuable lessons investors can learn.

We have tracked insider selling for quite some time, and it’s encouraging when you know that management owns a decent position in the company that they are working for. And when a CEO purchases more shares in their company it shows even greater confidence. However, when a CEO is dumping large portions of their position, it’s a big red flag.

We recently wrote an article about Tilray’s CEO Brendan Kennedy selling off 100,000 shares of the company for $16.28. This transaction took place on February 13th and equates to a total of $1.68 million. This follows 4 insider transactions from Brendan Kennedy just a month before in January, when he sold a total of 113,899 shares between January 3rd and January 15th. We did, however, notice that Kennedy exercised his option to purchase 100,000 shares during this time for an average price of $7.76.

The final blow to its share price recently was an extremely dilutive capital raise of over $90 million that the company needed to execute in order to stay afloat. 7,250,000 shares of its common stock were issued during a registered offering at a price to the public of $4.76 per share. The day these shares were issued Tilray’s stock plummeted. This, unfortunately, goes to show how tough of an environment most of the cannabis companies are faced with right now, especially the ones who lack a major investment partner.

When the market eventually bottoms out and volatility dies down, it’s crucial more than ever that Tilray utilizes the capital that they raised in hopes of survival. Investors will be laser-focused on the company’s ability to drastically cut expenses while at the same time growing the revenue streams. We have preached this for a very long time since the market started slamming many companies in the sector for not achieving profitability.

The end is nearing for many cannabis companies and even the large-cap stocks are not immune. Now that the share price of Tilray is in the low single digits, it’s now an all-out fight for survival. The company is faced with proving itself in an extremely unfavorable environment due to the COVID-19 crisis. We will see if Tilray can manage to convince investors next quarter that they are still here to stay but that won’t be an easy task. We will be watching from the sidelines, but things are not looking good right now.

TLRY shares rose $0.15 (+6.07%) in after-hours trading Wednesday. Year-to-date, TLRY has declined -85.58%, versus a -25.43% rise in the benchmark S&P 500 index during the same period.

About the Author: Aaron Missere

Aaron is an experienced investor who is also the CEO of Departures Capital. His primary focus is on the cannabis industry. He also hosts a weekly show on YouTube about marijuana stocks. Learn more about Aaron’s background, along with links to his most recent articles. More...