Skip to main content

Cannabis Tilray shares up 11 per cent on deal to merge with biggest shareholder

A worker checks cannabis plants inside the Tilray factory hothouse in Cantanhede, Portugal, on April 24.

RAFAEL MARCHANTE/Reuters

Part of cannabis and investing

Tilray Inc.’s stock soared after it signed a deal to merge with its largest shareholder while also putting limits on the release of resulting new shares in the Canadian cannabis company for two years.

Under the agreement, U.S. private equity firm Privateer Holdings Inc. will become a subsidiary of the Canadian cannabis company. However, new Tilray shares distributed as a result of the merger would be subject to a lock-up, allowing for their release only under certain circumstances, the pot firm said.

Tilray shares soared as high as US$46.65 on the Nasdaq after the announcement, up from its previous close of US$38.80. Shares closed at US$43.14, up more than 11 per cent.

Story continues below advertisement

“We appreciate the long-term confidence that Privateer has in the Tilray business. ... We believe this transaction will give Tilray greater control and operating flexibility, while allowing us to effectively manage our public float,” said Tilray’s chief financial officer Mark Castaneda in a statement on Monday.

Privateer, backed by venture capitalist Peter Thiel, holds 75 million shares or roughly a 77-per-cent stake in the Nanaimo, B.C.-based company.

Under the agreement, Tilray will acquire Privateer and its stake in the company in exchange for an equal number of new Tilray shares that will be issued to the U.S. private equity firm’s shareholders.

The new shares will be subject to a lock-up and may only be sold under certain circumstances over a two-year period.

During the first year, the shares will be released only in marketed offerings and/or block trades to institutional investors or via sales to strategic investors arranged at the sole discretion of Tilray. The remaining shares will be subject to a staggered release over the second year.

“We believe this structure will maximize overall returns for our visionary investors in a tax-efficient manner while giving Tilray the operating flexibility it needs to continue to be a leader in the rapidly emerging global cannabis industry,” said Michael Blue, managing partner of Privateer, in a statement.

Earlier this year, Privateer distributed its ownership of its three other operating subsidiaries, unrelated to Tilray, directly to its stockholders, the cannabis company said. The move left no material assets in Privateer other than the 75 million shares it currently holds in Tilray, it added.

Story continues below advertisement

The transaction effectively flips the control of a stock sale from Privateer to Tilray and provides the Canadian cannabis firm with the increased ability to manage its public float, said Vivien Azer, an analyst with Cowen and Company.

“In addition, the extended lock-up and conditions associated with the transactions reduces the risk associated with an excessive increase in TLRY’s public float,” she said in a note to clients.

Available now: Cannabis Professional, the authoritative news service tailored specifically for professionals in the rapidly evolving cannabis industry. Subscribe now.

Report an error Editorial code of conduct
Tickers mentioned in this story
Unchecking box will stop auto data updates
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

Cannabis pro newsletter