Tilray (TLRY) is on the rise again after surging almost 20% on Friday following a statement by Privateer Holdings saying it does not have plans to register, sell or distribute the 75M shares that it owns when an initial public offering lock-up expires on Tuesday, January 15. Meanwhile, Piper Jaffray analyst Michael Lavery started coverage of the stock with an Overweight rating last week, saying Tilray "has the ingredients for long-term growth."
PRIVATEER HOLDINGS NOT PLANING TO SELL: In a statement late last week, Privateer Holdings said it does not have plans to register, sell or distribute the 75M shares that it owns in Tilray when the lock-up expires. "Privateer Holdings strongly believes in Tilray's long-term global growth strategy and pioneering role in shaping the future of the legal cannabis industry. Given this, we do not have plans to register, sell or distribute the shares Privateer holds in Tilray during the first half of 2019. When we decide to distribute shares, we will do so in an orderly and deliberate manner to maximize tax-efficiency considerations for Privateer investors, while also taking into consideration potential impacts on Tilray's public float. And we will do it in a way that reflects our long-term confidence in Tilray's business model and management team," Michael Blue, Managing Partner of Privateer Holdings, said. Over the last months, Tilray stock has came under pressure with the pending IPO lock-up January 15 date. Such lockup periods are designed to prevent company insiders - including employees, their friends and family and venture capitalists - from selling their shares for a set period of time, according to the Securities and Exchange Commission. Commenting on the announcement and the upcoming IPO lock-up expiration, Roth Capital analyst Scott Fortune noted there are currently about 93M Tilray shares that are technically tradeable upon the expiration of the lock-up, but Privateer currently owns 75M and management has stated there are highly adverse tax consequences for the shareholders if they are converted and sold prior to the end of April, 2019. As a result, the analyst believes only about 8%, or 8M, of shares outstanding will be released from the lock-up. Regarding Privateer's 75M shares, Fortune said he expects a gradual distribution to occur starting in mid-2019, in a limited manner and a highly managed process over time to limit the market impact on Tilray's share price. The analyst has a Neutral rating on Tilray's stock.
PIPER SAYS BUY TILRAY: Last week, Piper Jaffray's Lavery initiated coverage of Tilray with an Overweight rating and $90 price target. The analyst told investors that he expects "strong" industry growth long-term, and believes Tilray is well positioned to be one of several likely winners given its relationships in medical, in the U.S., and in beverages. While Lavery acknowledged that the company's IPO lock-up expiry is a near-term risk, especially with 77% insider ownership, he pointed out that his 12-month Overweight view is based on its fundamental outlook. He pegs Tilray's market opportunity at $15B-$50B in the near-term, and potentially $250B-$500B over the longer term.
PRICE ACTION: In late morning trading, shares of Tilray have gained over 6% to $101.80.