Nanaimo cannabis producer Tilray Inc., will be valued between US$1.3 billion and $1.5 billion when its shares begin trading on the Nasdaq Stock Market in the coming weeks, according to forms filed with the U.S. Securities and Exchange Commission on Monday.
Tilray, Canada’s last large licensed marijuana producer to go public, expects to issue 9 million new shares in the initial public offering, priced between US$14 and $16.
The IPO will give Tilray an additional US$126 to $144 million, which it intends to use to pay off debt and expand its facilities on Vancouver Island, in Enniskillen and London, Ont. and in Portugal.
Tilray, which is backed by Seattle-based cannabis investment firm Privateer Holdings Inc., will be the third Canadian cannabis company to list on a major American exchange. In February, Cronos Group Inc. became the first LP to list on the Nasdaq. Canopy Growth Corp. listed on the New York Stock Exchange in May.
A syndicate of five investment banks is underwriting the deal, with New York firm Cowen and Company, LLC leading the U.S. side of the deal and BMO Nesbitt Burns Inc. and Eight Capital underwriting the Canadian offering. The underwriters have a 30-day option to purchase an additional 1,350,000 shares.
After the IPO, Tilray will have roughly 92 million shares outstanding. Only the 9 million shares being sold as part of the IPO, however, will freely trade at first; the vast majority of shares are subject to a six month lock-up period.
After the IPO, Tilray will remain a “controlled company,” with Privateer owning 75 million shares, or 82 per cent of the company. In addition, Tilray has opted for a two-class share structure, with Class 1 shares — owned exclusively by Privateer — counting for three votes to every one Class 2 share vote.
This gives Privateer 93 per cent voting power, part of a broader effort to limit potential takeover bids.
With an anticipated market capitalization of more than $1.5 billion to start, Tilray will likely become the fourth or fifth most valuable public Canadian cannabis company.
Like other richly-valued public LPs, Tilray’s unicorn status comes despite no profit and limited revenue (compared to valuation) from medical marijuana sales in Canada and abroad. In the quarter ended March 31, 2018 the company reported a loss of US$5.1 million on $7.8 million in revenue.
That said, the company, founded in 2013, has managed to make inroads in medical marijuana markets in 10 countries, and has signed a partnership with drug maker Sandoz Canada Inc., a subsidiary of Novartis International AG, one of the largest pharmaceutical companies in the world.
For Canada’s recreational cannabis market, set to kick off in October, Tilray has access to Privateer-owned U.S. cannabis brands — including Marley Natural, backed by Bob Marley’s family — that it plans bring to Canada through its rec-focused subsidiary High Park Company.
While most other legal cannabis companies have been making splashy announcements, using their publicly-trading paper as currency and compensation, Tilray appears to have been more focused on executing on a business plan. But going public this late in the game does mean the company will be facing competitors with much larger war chests.
“We face, and we expect to continue to face, intense competition from other Licensed Producers and other potential competitors, some of which have longer operating histories and more financial resources and manufacturing and marketing experience than we have,” the company wrote in its SEC filing.
“In addition, it is possible that the medical cannabis industry will undergo consolidation, creating larger companies with financial resources, manufacturing and marketing capabilities and product offerings that are greater than ours. As a result of this competition, we may be unable to maintain our operations or develop them as currently proposed, on terms we consider acceptable, or at all.”
Source: financialpost.com
