Canadian marijuana company Tilray has first US pot IPO
Seattle – Another big first for the marijuana industry is in the books: A major Canadian grower, processor and distributor has completed an initial public stock offering in the United States, raising $153 million, just as Canada prepares to legalize the drug nationwide.
British Columbia-based Tilray Inc.’s shares began trading Thursday on the Nasdaq stock exchange, initially priced at $17. It quickly jumped to more than $21.
It isn’t the first pot company to trade on a major American stock exchange, but it is the first to do so with an IPO, a step that could boost credibility and confidence in the industry, said John Kagia, an industry analyst with the marijuana market research firm New Frontier Data.
“It’s another high-profile marker of how the cannabis industry is maturing and professionalizing,” he said.
Two other Canadian marijuana companies began trading on major U.S. exchanges earlier this year – Cronos Group on Nasdaq and Canopy Growth on the New York Stock Exchange. Those companies were already publicly traded in Canada.
Some U.S. states have legalized the recreational use of marijuana, but American companies have been unable to list because of the drug’s illegality under federal law. Instead, many have gone public in Canada by being acquired by companies there.
Medical marijuana is legal in Canada, and the recreational use and sale become legal on Oct. 17.
Chris Barry, a partner at the Dorsey and Whitney law firm in Seattle, handles marijuana investment deals and mergers in both countries. He noted that major institutional investors, including the century-old New York investment bank Cowen, were involved in Tilray’s IPO.
“You wouldn’t be able to do an offering of that size without institutional participation,” Barry said. “The lesson is that the institutions will be there if you have a good business plan and your business is 100 percent legal in the jurisdiction you’re in.”
Tilray plans to use the money to build additional marijuana growing and processing capacity in Ontario, and to repay Privateer Holdings, the Seattle-based private equity firm that controls it.
Kagia said analysts will be watching to see how the Canadian marijuana stocks perform in the U.S. Many are concerned that the companies may be overvalued amid excitement around what amounts to a newly legitimate industry with vast growth potential. Canada’s recreational marijuana market is expected to be worth between $5 billion and $9 billion.
“Right now a lot of investment has been highly speculative. Those valuations feel a little supercharged,” Kagia said. “We expect some kind of correction in the near future.”
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