Why has Tiray gone parabolic?
Tilray is the perfect storm of a well run company, savvy investors, a low float, a hot industry, and a ton of (mostly positive) publicity. It is one of the few Canadian cannabis companies listed on the US Stock exchange. It has relatively clean financials, compared to most Canadian cannabis companies (more on that in later posts). Did I mention it has a tiny float?!?
The tradeable float is 17,000,000. The entire share count is 91,666,667, which will become eligible for sale on January 15th according to Edgar Online (180 days from IPO). There is a possibility that some shares could become tradable after October 19th (90 days after the IPO). Privateer holds 16,666,667 multiple voting shares and 58.333.333 subordinated voting shares, for a total of 75,000,000 of the 91,666,667 (approx.) shares outstanding. Lock up period is 180 days from IPO.
Let’s take a peak at the financials. At a price of $93 (price as of September 5th 2018), Tilray has a market cap of $8.5 billion dollars. Lets back into a valuation for an $8.5 billion company. Even if we generously give it a valuation of 15 times 2021 EBITDA, Tilray would have need $2.2 billion in sales and to generate $558 million in EBITDA (assuming a 25% EBITDA margin, which is Tiray’s own target used in their investor deck). This given a run rate of $46 million revenue in 2018, that would imply a CAGR of 263%, quite a feat for what is essentially a commodity company.
Furthermore,Tilray did an IPO on at $17 a share July 19th. If the real value is $93 one month later, that would mean the investment bankers really miss calculated the value of this company. I am assuming that Cowen, Roth Capital, BMO Nesbitt Burns and Eight Capital did a lot more due diligence then people who have been buying the last few days.
How to trade it? If you are long, congratulations, but I would take some profits. If you want to try to make some money on the downside, buy out of the money puts, preferably with an expiration after October 17th, once the hourly chart makes a lower low.
Sveiki Capital 