Tilray’s surge in share price was thanks to a new agreement to extend the lockup of shares owned by investment firm Privateer Holdings.
According to Tilray, the special agreement with Privateer Holdings will extend the current lockup of 75 million shares of the marijuana company, so if a sale of shares happens it will be heavily restricted.
Tilray opened on Monday at a price of US$44.26. The stock finished the day with an increase of 14.88 percent from the previous day’s close to reach a price point of US$44.57.
In this transaction, Tilray will acquire Privateer in what is referred to as a downstream merger. Once the acquisition goes through, Tilray will issue Privateer shareholders the same number of its own shares that they currently own.
The resulting new shares will be placed in a lockup and only allowed for sale in special conditions over a two year period.
During the first year, the restriction will be held except for “marketed offerings and/or block trades to institutional investors or via stock sales to strategic investors.”
Privateer financed Tilray’s early days and its path to its initial public offering (IPO) on a senior US exchange in July 2018. Brendan Kennedy, CEO of Tilray, acts as executive chairman for the investment firm as well.
“We believe this transaction will give Tilray greater control and operating flexibility, while allowing us to effectively manage our public float,” Mark Castaneda, chief financial officer of Tilray, said in a press release.
Seattle-based investment firm Privateer holds an ownership stake of 77 percent of Tilray’s total outstanding shares.
Michael Blue, managing partner of Privateer, said the investment firm sees this deal as maximizing overall returns for its investors, while at the same time giving Tilray “the operating flexibility it needs” in its operations.
In January, Tilray reached the IPO lockup deadline for its shares, which caused the stock to drop double digits in value.
The stock of Tilray is removed from its volatile trading days during which it was a popular trading item that even reached a price of US$300 at one time in 2018.
Over a year-to-date period the company has posted a loss in value of 44.93 percent. However, since the IPO was completed in July 2018, the company has surged 30.33 percent.
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.