Tilray IPO sees stock soar as investors bet on marijuana
Tilray shares surged on Thursday as it became the first marijuana products company to launch an initial public offering on a major U.S. stock exchange, a boost for the burgeoning cannabis sector.
The Canadian startup's stock, which trades on Nasdaq, jumped nearly 32 percent to close at $22.39. Investors snapped up 9 million shares at $17 per share, at the upper end of the company's estimated range of $14 to $17.
"It's another high-profile marker of how the cannabis industry is maturing and professionalizing," John Kagia, an industry analyst with marijuana market research firm New Frontier Data, told the Associated Press.
Tilray, which is based in British Columbia but controlled by U.S. private equity firm Privateer Holdings, raised $153 million in the offering. The startup will use the money to expand its marijuana growing and processing facilities in Ontario and to repay Privateer.
"Becoming the first cannabis producer to successfully launch an IPO in this U.S. is a clear validation of the market's perception of cannabis as a legitimate industry with tremendous global growth potential," Tilray CEO Brendan Kennedy said in a statement.
Launched in 2014, Tilray has yet to turn a profit, recording a net loss of $7.8 million in 2017. In the first quarter, Tilray lost $5.2 million, compared a loss of $700,000 in the year-ago period. As of March 31, the company's total debt was nearly $46 million, with the company continuing to spend to drive growth.
"We intend to continue to expend significant funds to increase our growing capacity, invest in research and development, and expand our marketing and sales operations to increase our registered patients and to meet the increased compliance requirements associated with our transition to and operation as a public company," Tilray said in the filing. "As we continue to grow, we expect the aggregate amount of these expenses will also continue to grow."
For now, Tilray is not selling its products in the U.S. market because marijuana remains illegal under federal law, although 30 states and the District of Columbia have legalized cannabis in some form. U.S. Attorney General Jeff Sessions opposes to national legalization of cannabis.
By contrast, Canada's law legalizing marijuana for both medical and recreational use is slated to take effect in October. It is the first member of the G-7 group of industrialized countries to do so. A Deloitte study cited by Tilray pegs the size of Canada's cannabis market at $1.3 to $3.2 billion.
Tilray was one of the first companies in Canada to be licensed by Health Canada to cultivate and sell medical cannabis and was the first company to legally export medical marijuana from North America to Europe, Africa, Australia and South America.
Two other Canadian cannabis companies, Cronos Group and Canopy Growth, began trading on U.S. exchanges this year, though neither company went through the IPO process.
-- The Associated Press contributed to this story