Companies and Brands

Tilray Stock Dives as Shares Released From Lockup Period

Paul Ausick

Published: March 31, 2020 9:40 am

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.

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.