TLRY Is Desperate
In a press release issued yesterday, Tilray asks its shareholders to approve an authorization to issue up to 990 million shares from the current 743 million (there are currently 447 million shares outstanding.) This is not a joke, this is an actual press release. Obviously, the company can only enter the US market by asking shareholders to dilute the shares they own. The letter to shareholders reads: "We need your help to ensure Tilray grows – and to ensure YOU are able to participate in our success in a meaningful, constructive manner...We Have Substantial Growth Opportunities Ahead, and We Need Your Support: To go from potential to performance, however, we need your help." The full press release is available on the Tilray website, and I encourage you to read it, it's entertaining.
The merger with Aphria has been a disaster and yesterday's PR shows that the CEO is desperate. As we wrote about, when CRON took a 10% stake in PharmaCann, only two companies have the balance sheet to enter the US (CRON and CGC). At the end of 1Q21, TLRY has $416 Million in cash and $311 million in debt. The company only has that much cash because they did an ATM and issued 6.2 million shares for gross proceeds of $159 million during 1Q21. After burning $417 million in cash over the past three years, it will burn another $40 million in FY21 and FY22 will not be much better. The management team has no choice but to issue stupid press releases like the one yesterday to keep its gullible retail shareholders believing that this company will be a significant player in the US cannabis market.
If I'm a profitable US cannabis company with strong operations and a bright future, am I going to sell my company to an unprofitable Canadian company with nearly 1.0 billion shares outstanding? They might find some company that will be a willing seller, but it will NOT be a top-tier publically traded company! TLRY can issue all the shares they want, but they will likely never have a national footprint in the US cannabis market!
New Mexico Legalization Takes Effect
As of yesterday, legalization laws took effect with individuals 21 and up allowed to possess up to two ounces of cannabis. The next states with adult-use legalization laws coming up at Virginia and Connecticut will go into effect tomorrow. Under a timeline published by the Cannabis Control Division, sales must begin by April 1, 2022. Regulators will hold the first public hearing on cannabis production rules on Tuesday. There is no set limit on the number of business licenses granted under the program or the number of facilities a licensee could open. Regulators could, however, stop issuing new licenses if an advisory committee determines that “market equilibrium is deficient.” Cannabis sales will have a 12% excise tax tacked on, on top of the 8% sales tax. In 2025 this excise tax will climb by one percent each year until it reaches 18%.
CCHWF Issues Debt
CCHWF is a USA long.
Columbia Care announced that it closed on $74.5 Million of 6% secured convertible notes issued in a private placement. The notes are senior secured and will accrue interest payable semi-annually. The conversion rate will be 154 common shares of the company per $1,000 of principal. The notes represent a premium of approximately 25% over the closing price on June 17th. Columbia Care stated, "The net proceeds from the Offering will be used for working capital and general corporate purposes."
