Is there more potential for the Tilray stock?
Tilray and Aphria have completed their merger that would create a marijuana powerhouse. What future for Tilray after its merger with Aphria?
The merger between Tilray and Aphria, which was announced last year, was structured as a reverse merger as Tilray acquired Aphria, which was the larger between the two companies.
While Aphria shareholders approved the merger earlier in April, Tilray extended the date for voting on the merger and also lowered the required quorum. Ultimately, the merger was completed and Tilray is now also listed on the Toronto Stock Exchange with its primary listing in the United States.
Tilray begins trading on the Canadian stock exchange
As for Aphria, it ceased operations and all existing Aphria shareholders received 0.8381 Tilray share for each Aphria share they held. Meanwhile, Aphria shareholders now hold the majority stake in Tilray. Aphria CEO Irwin D. Simon is Tilray’s new CEO and chairman, while Brendan Kennedy, the company’s pre-merger CEO, has joined the board.
Commenting on the merger, Simon said, “We are now focused on executing our highest performance priorities, including business integration and accelerating our global growth strategy. Lockdowns linked to Covid-19 presented unique challenges in the Canadian and German markets. “
Irwin Simon on fusion
He added, “As these markets begin to reopen, Tilray is poised to strike and transform the industry with our highly scalable operational footprint, an organized portfolio of diverse brands and cannabis products for medical and adult use, a distribution network multicontinental and a strong capital structure to fund our strategy of global expansion and deliver sustained profitability and long-term value to our stakeholders.
Meanwhile, now that the merger euphoria has ended, attention would shift to the fundamentals of Tilray and how the company executes its business plans, including the annual pre-tax synergies of $ 81 million. dollars that she expects over the next 18 months.
Tilray records losses
In addition, the combined entity is making losses and investors would watch the indices on the way to profitability. Most cannabis companies are posting losses, but investors have been supported by strong revenue growth and the prospect of federal legalization of marijuana in the United States.
Meanwhile, while cannabis stocks soared after Joe Biden was elected President of the United States and continued their uptrend after the Senate second round in January, they have since come under pressure and all cannabis stocks have fallen sharply from at their 52 week highs.
Tilray was targeted by WallStreetBets
Tilray was among the worst performers on pullback from 52 week highs. That said, the stock had skyrocketed amid the pumping by Reddit group WallStreetBets and its stock price rose well above what it should have traded based on the merger ratio. As the short squeeze took its course, Tilray stock collapsed and merger arbitrage with Aphria stock gradually faded away.
All stocks that have been pumped by WallStreetBets, including Zomedica and Sundial Growers, have fallen sharply from their highs. While a short press can only influence the price action in the short term, there is a long term impact of mania.
The Reddit mania is over
First, the companies pumped by WallStreetBets have raised a lot of capital by selling stocks at high prices. The high prices were only made possible thanks to the pumping of WallStreetBets. Second, short sellers have been reluctant to take bearish bets against these companies fearing further sales squeeze. This would help these companies reduce their cost of capital in the medium and long term.
Jefferies improves Tilray
Coming back to the Tilray stock, as it was on the decline after the Aphria merger, Jefferies put his weight behind the cannabis company. Jefferies analyst Owen Bennett moved Tilray stock from underperforming to outperforming while forecasting a 60% rise in pot stock.
“For us when Aphria and Tilray combined it was the perfect match. In Canada, a portfolio of leading brands, supported [by] an efficient cost structure. In Europe, the market is now recovering, while Tilray’s size and Aphria’s unique German positioning make it perfectly suited to succeed, ”analysts said in their note.
In particular, Tilray operates in Europe as well as in North America. The company sells recreational and medical marijuana. Curaleaf is also expanding in Europe with the acquisition of EMMAC Life Sciences.
Jefferies sees over 60% increase
Sounding a bullish note on Tilray, Jefferies said that “Tilray’s BS ($ 372 million in cash) should support a short-term entry into the United States as long as the state-to-state structure persists. When federal legalization is complete, then the infrastructure / brand equity / notoriety of its larger consumer businesses (hemp-food / CBD / alcohol) will also be beneficial. “
How to trade cannabis stocks
Tilray stock was trading over 6% higher in pre-market trading in the US today. More analysts could take a bullish note on Tilray stock after the merger. As all marijuana stocks have plummeted after the euphoria over legalization, we may see some recovery in cannabis companies.
You can buy Tilray shares through any of the reputable online brokers. Alternatively, if you are interested in trading derivatives, we have also looked at a list of derivatives brokers you can consider.
An alternative approach to investing in the cannabis company could be to invest in ETFs that invest in marijuana companies.
With a marijuana ETF, you can diversify your risk across many companies instead of only investing in a few companies. While this could mean you might miss home runs, you also won’t end up owning the worst performing stocks in your portfolio. The AdvisorShares Pure Cannabis ETF (YOLO) is an ETF that invests in marijuana companies.
By investing in an ETF, you get returns linked to the underlying index after factoring in fees and other transaction costs. There is also a guide on how to trading ETFs