‘Validation’: Tilray shares surge in B.C. cannabis grower’s first day of Nasdaq trading

Tilray Inc. stock shot up nearly 30 per cent in its first several hours of trading on the Nasdaq Stock Market Thursday, as the Nanaimo-based company became the first cannabis grower to go public in the U.S.

The company raised US$153 million in its initial public offering, selling nine million shares at US$17. It had expected to price the shares between US$14 and US$16, but high investor demand pushed the price up, implying a valuation on the company of about US$1.6 billion.

By noon on Thursday shares were trading just shy of US$22.

“It’s a validation for both us and the sector, and it signifies a shift in perceptions,” said Tilray chief executive Brendan Kennedy, speaking about the company’s decision to go public in the U.S.

The Canadian side of the offering, around 2.5 million shares, was led by BMO Nesbitt Burns Inc. The rest of the deal went to buyers south of the border, with New York investment bank Cowen and Company, LLC as lead underwriter.  

From early on, Tilray has differed from its peers by remaining private and looking mostly to the U.S. for capital. According to Kennedy, the company was waiting for the Cannabis Act to pass in Canada before going public. It filed its prospectus with the U.S. Securities and Exchange Commission the day after Bill C-45 received Royal Assent.

Started in 2013, the company is owned by Seattle-based Privateer Holdings Inc., a cannabis investment firm that has raised around US$250 million over the past several years to invest in the emerging sector. It counts the fund owned by Paypal founders Peter Thiel, Ken Howery and Luke Nosek as an early backer.

Tilray raised US$153 million in its initial public offering, selling nine million shares at US$17.

In February, Tilray raised $60 million in Series A financing from a number of U.S. hedge funds, including San Francisco-based Farallon Capital Management, L.L.C., a prominent US$20 billion fund.

“There were 10 institutional investors that participated in that round, nine of them were from the U.S., one was from Canada. Eight of them had never made an investment in this industry,” said Kennedy.

With Thursday’s IPO, these funds had the option to match their earlier investment, which, according to Kennedy, “many of them did.”

Tilray will be the third Canadian cannabis company to list on a major American exchange. After first going public in Canada, Cronos Group Inc. listed on the Nasdaq in February, and Canopy Growth Corp. listed on the New York Stock Exchange in May.

Going forward, Tilray will remain largely under the control of Privateer, which owns 82 per cent of Tilray shares and controls 93 per cent of the company’s voting power through a dual class share structure that gives Privateer three votes for each share it owns.

“Any time you start at 100 (ownership) it will take a while to get below a controlling ownership, so this is just a step in the process,” said Kennedy. “The series A was one step in the past towards liquidity and today is another step.”

The money raised in the IPO will go mainly towards building out the company’s recreational cannabis-focused facility in Enniskillen, Ont., as well as a medical marijuana cultivation facility in Portugal, said Kennedy.

Only the nine million shares offered on Thursday will freely trade to start. The rest of the shares, including the 75 million owned by Privateer, are subject to a six-month lock up.

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https://business.financialpost.com/cannabis/validation-tilray-shares-surge-in-b-c-cannabis-growers-first-day-of-nasdaq-trading