Tilray stock sky-rocketed yesterday with an industry insider describing its surge as “crazy” on a wild day for the marijuana sector.
The company’s shares hit US$300 mid-afternoon before retreating to $214.06 by close, still up a stunning 38%. The NASDAQ halted trading five times within one hour.
The BC-based licensed producer’s market capitalization was about US$19.9 billion at close, meaning it was worth more than regular industry leader Canopy Growth, which was valued at US$11.28 billion.
The frenzy around Tilray appeared to stem from it getting the green light from the US Drug Enforcement Administration to export cannabis in capsule form to a researcher at a university in the States.
Peter Horvath, CEO of Green Growth Brands, which focuses on the medicinal and recreational use of Cannabis and CBD in both the US and Canada, was taken aback by Tilray’s rollercoaster day on the market.
The former Victoria’s Secret EVO COO said the industry has gone “bonkers” and joked that, with Tilray’s value up 800% since July, he was glad he wasn’t buying in right now.
However, he added that the industry’s rapid growth is good for the industry as a whole ahead of Canada’s October 17 recreational marijuana legalization day and the growing number of US states embracing it.
He said: “We’re all excited that the markets are highly valued because what that gives you is a currency that can be leveraged to consolidate, to invest and to do things that can grow your business.
“Most of these guys are locked up and they can’t sell any of their stocks for a year, so I don’t think they are going to see this value in the future.”
He added: “All I can say is the obvious, traditional fundamental valuations wouldn’t support these prices and wouldn’t have supported them nine months ago either. So obviously traditional valuation techniques aren’t relevant and we’re right back to where the dotcom boom was, which means there will be a day of reckoning at some point ... but it doesn’t seem to be any time soon!”
Horvath has just returned from five weeks of successful capital raising and is looking to expand the GBB operation in the US and Canada. He said exciting announcements are imminent.
But while the cannabis sector is a vibrant place to be right now with firms speculating on its potential, Horvath was left scratching his head at the valuations even as giant beverage companies come into the space.
He said: “I can’t imagine the valuation list for Canadian demand makes any sense. I guess the expectation is the there is going to be international trade with these Canadian LPs and cultivators and that is going to be where the value is going to come from.
“The Tilray valuations had to do with them being able to provide products for research … well it’s not like it’s going to be billions of dollars of products! It doesn’t warrant a $10 billion valuation.”
Follow WP on Facebook, LinkedIn and Twitter
More market talk: