Tilray Stock Dives as Shares Released From Lockup Period

Canada-based Tilray Inc. (NASDAQ: TLRY) on Tuesday announced that the company’s board had approved the release of 11 million shares of Class 2 common stock held by former equity holders of Privateer Holdings. According to the company, the release will be treated as a “permitted sale” under lockup agreements between Tilray and Privateer made when the two companies merged in September of 2019.

Tilray’s shares, predictably, nosedived in Tuesday’s premarket, trading down about 9% at $6.00 a share.

On March 13, the company announced an underwritten secondary offering of 7,250,000 shares of its Class 2 common stock, along with warrants to purchase 11,750,000 of its Class 2 common shares and accompanying warrants to purchase another 19,000,000 Class 2 shares. The stock closed at $4.03 on its way to a 52-week low of $2.43 a few days later.

Releasing another 11 million shares on April 3 further dilutes existing shareholders at a time when options trading had been pushing the shares back up. The release includes about 14.5% of the 75 million shares covered by the locked-up shares.

Tilray Chief Financial Officer Michael Kruteck said:

The shares to be released on April 3, 2020 are part of the previously announced release of Tilray stock over a two-year period. We believe the staggered release of locked-up shares, as well as strategic and marketed offerings, will manage our public float in an orderly fashion.

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Tilray has 87.39 million shares outstanding, but only 7.5 million have been floated to the public. Even after these locked-up shares are released, only 18.5 million shares, or 21.2% of outstanding shares will be floated.

That’s still not very many, and there are 66 million yet to be released from lockup. For most investors, Tilray probably looks like a penny-stock-in-waiting.

Shortly after the opening bell, shares traded down 5% to $6.28, in a 52-week range of $2.43 to $64.85. The stock closed at $6.61 on Monday. The year-to-date high is just under $17.00.

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