Marijuana Stocks: Tilray Set To Become First U.S. Marijuana IPO

This year, the first two straight-up marijuana stocks joined the New York Stock Exchange and the Nasdaq. This week, the cannabis industry could cross another milestone: The first pure-play marijuana IPO on a major U.S. exchange.

Canadian medical-pot producer Tilray, which would-be first U.S. marijuana IPO, says it expects to price shares on Wednesday after the market close and begin trading Thursday. Shares are expected to trade on the Nasdaq under the ticker “TLRY.” The company filed a registration statement for the proposed offering in June and has applied to list on the Nasdaq Global Select Market.

Along with being the U.S.’ first pure-play marijuana IPO, Tilray would be the third marijuana stock to list on a major U.S. exchange. Canopy Growth (CGC), which already traded in Canada under the ticker “WEED,” first listed on the New York Stock Exchange in May. Cronos Group (CRON), which also traded in Canada initially, first listed on the Nasdaq in February. But those listings were not technically IPOs.
An IPO could also fund Tilray’s global ambitions, particularly in the European Union and in Germany. Canopy Growth last month also pegged Germany as a market to watch.

$144 Million Marijuana IPO?
Tilray last week said it would offer 9 million shares with an expected price range of $14-$16 apiece, an offering that could raise as much as $144 million. The company declined to make someone available for an interview ahead of the planned IPO, saying it was in a quiet period before the offering.

Regulatory disclosures say the IPO would help fund the company’s plans to expand cultivation resources, sales and marketing efforts. The IPO money could also go toward potential acquisitions and investments down the road.

According to a regulatory filing this month, the company is aiming to have around 886,000 square feet of worldwide production space by the end of this year. It has offices in Toronto, Berlin and Sydney, and cultivation facilities in Canada and Portugal. The company sells marijuana in 10 countries via subsidiaries and pharmaceutical distributors, the filing said. Privateer Holdings, a cannabis investment company in Seattle, owns Tilray.

Over the past several months, Canadian marijuana companies have had an easier time listing on U.S. exchanges, which don’t necessarily exempt marijuana companies if their business is legal in the nation where they’re based. Medical marijuana is already legal in Canada. Recreational legalization is set to kick in on Oct. 17.

As for U.S. companies, some have opted to go public in Canada via a deal known as a reverse takeover. MedMen, a large U.S. marijuana producer, went public in Canada in May via such a deal.

Banks Get Behind Marijuana Stocks
Cowen and BMO Capital Markets are serving as the book-runners for the proposed IPO. Support from financial firms like that align with a bigger trend: More banks have shown a willingness to embrace the industry in the U.S. despite being outlawed on a federal level.

The number of U.S. financial institutions that are working with the industry in some way increased roughly 29% between October 2016 and March of this year, according to New Frontier Data, a research firm focused on the cannabis industry. Most of those are state-chartered banks or credit unions, the firm said.

MedMen said in a filing this year that its banks “are fully aware of the nature of the company’s business and continue to remain supportive of the company’s growth plans.”

Marijuana Stocks Eye Europe
Tilray said it expects the European Union to eventually become the world’s biggest medical marijuana market. The company based that prediction on the availability of medical pot via government-subsidized health care in the region. Eleven of the 28 EU member nations, Tilray said, have OK’d the use of medical marijuana.
Tilray said Germany was “the largest market opportunity in the European Union in the near term.” Germany, which legalized medical marijuana last year, has a population and a GDP that are more than two times that of Canada’s, Tilray said.
Canopy Growth CEO Bruce Linton last month also said that Germany would be “the market I would keep an eye on over the next 12 months in Europe.”
Marijuana Stocks Mixed

Cronos Group rose 0.6% in the stock market today. Canopy Growth was down 2.9%.
Corona parent Constellation Brands (STZ) ticked up 0.7%. Constellation invested in Canopy last year. The beer-and-wine giant has also shown interest in legal ways to enter the U.S. cannabis business.

Scotts Miracle-Gro (SMG), which has a hydroponics business, lost 3.2%.
Cannabis-focused exchange-traded fund ETFMG Alternative Harvest (MJ) retreated 1.2%, and AdvisorShares Vice ETF (ACT), which also has exposure to cannabis, was flat.


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