by Alexander Lekhtman
Jan 23, 2019
In the wake of full-scale cannabis legalization in Canada and the legalization of hemp-derived CBD in the United States, legal marijuana behemoth Tilray is aggressively making headway into new markets around the world. On Tuesday January 15, 2019, the Canadian marijuana producer announced a multi-million dollar partnership with Authentic Brands Group. Authentic Brands owns a vast portfolio of some of the most famous consumer brands, including Juicy Couture, Nine West, Nautica, Aéropostale, and more.
Tilray agreed to pay Authentic $100 million upfront, with a potential $250 million worth of cash and stock promised additionally if the deal succeeds. Authentic will develop and sell cannabis and CBD-branded products, and pay Tilray 49 percent of revenues. On top of that, they will pay Tilray a minimum of $10 million each year for ten years. Tilray hopes that through Authentic’s vast empire of brands, they will introduce millions of new consumers to cannabis and CBD products throughout North America.
Tilray made a splash in July 2018 by becoming the first marijuana-producing corporation to go public in the United States on the Nasdaq, which is the world's second largest stock exchange behind the New York Stock Exchange. Its initial stock price of $17/share ballooned to a peak of $300 in September, then lost more than 70 percent of its value since, landing at $77.20 today.
In fact, on the same day Tilray announced the Authentic partnership, its stock fell by 12 percent as its 180 day "lockup period" expired. A lockup is a period of time after a company’s initial public offering (IPO) when its shareholders (specifically those who invested before the IPO) are restricted from selling their stock. In practice, this is to prevent company insiders from "dumping" or selling their stock immediately, which would effectively drive down the price and demand for new investors.
About 80 million of Tilray’s shares were thus freed up for sale on January 15, causing a decrease in value, though effectively only about 8 million shares were available. This is because about 80 percent of Tilray’s shares are owned by Privateer Holdings, a private equity fund backed by billionaire Peter Thiel. Privateer announced in advance they had no plans to sell any of their shares, citing a “[strong belief] in Tilray's long-term global growth strategy and pioneering role in shaping the future of the legal cannabis industry.”
The Authentic deal is just the newest in a series of high-profile partnerships Tilray has struck recently. In December 2018, they formed a joint venture worth $100 million with AB InBev to research and develop non-alcoholic cannabis infused beverages to be sold in Canada. AB InBev is the parent of Anheuser-Busch, producer of Budweiser beer. THC or CBD-infused drinks are not yet available for sale in Canada, however, until the government creates regulations for cannabis edibles and beverages.
The same month, Tilray reached a first-of-its-kind deal with Sandoz Canada, a division of Swiss pharmaceutical company Novartis, to globally market Tilray’s non-combustible medical cannabis products. The companies will also develop and co-brand new products, and educate physicians and pharmacies about medical cannabis.
Across the broader cannabis industry, CBD brands and producers may receive a wealth of new business opportunity after H.R. 2 passed in December. The $867 billion farm bill signed by President Donald Trump legalized industrial hemp and cannabidiol (CBD) derived from it. The legislation removes hemp and CBD from the federal Controlled Substances Act, and according to the Brightfield Group, will clear the way for an industry worth a potential $20 billion by 2022. With the numbers stacking up, we're sure to see cannabis catch up to other mainstream North American industries in no time.