Tilray (NYSE:TLRY) has taken its investors on a tumultuous ride that now sees the American cannabis company, with a license to produce the drug in Canada, with a wide range of options for its international expansion plans.

Since completing its initial public offering (IPO) in July 2018, stock for the British Columbia-based marijuana firm has seen extreme swings in value, one of the clearest signs of the volatility still seen in cannabis investing.

Tilray peaked at US$300 a share late in 2018 before finishing that same year at a price of US$75.15. A year after its IPO, the share price fell to US$46.98.

The Tilray share price rise event was a bubble burst some stock market experts saw as inevitable.

Despite the massive drop, the company still boasts an impressive market cap of US$2.9 billion, one of the largest in the current cannabis landscape.

It’s now been almost a year since cannabis was legalized in Canada and the legalization of edible cannabis products in the country has been the talk of the market. Tilray has taken steps towards making a case to consumers to consider its products.

Across the border in the US cannabis still isn’t federally legal, but over 30 states have legalized the drug for medical purposes and through a series of acquisitions, partnerships and exports, Tilray has grown its reputation as a key supplier of medical cannabis products within the country.

The company has continued to be a major player in the space and worked since its IPO to establish itself as the cannabis industry matures, making it an interesting firm for investors to keep an eye on. Read on to learn about the potential benefits and risks of investing in Tilray.

Tilray’s advantages

Tilray’s IPO came out in 2018 but the company isn’t new. It’s been around since 2013, making it one of the original brands in the space. As such, it has a solid foundation in infrastructure and a broad set of supply deals — both old and new — for medical cannabis.

Tilray made news in 2018 when it became the first Canadian firm to gain approval from the US Drug Enforcement Administration to import medical cannabis for a clinical trial and since then, it has been the place to go for supplies of medical marijuana.

In fact, Tilray has supply deals with countries all over the world. The cannabis producer announced its subsidiary, Tilray Portugal Unipessoal, opened a new outdoor cultivation facility in the European nation. The company’s campus in Portugal serves as a hub for Tilray’s research and product development efforts in Europe.

Tilray’s presence in Portugal has made shipping cannabis across the continent easier and most recently, the company signed a deal with Cannamedical Pharma GmbH to export US$3.3 million worth in medical marijuana products into Germany, the first shipment from its Portugal campus to do so. As a farmer and exporter, Tilray has some experience and strategic relationships on its side.

Speaking of strategic relationships, Tilray’s relationship with PayPal founder Peter Thiel can’t be ignored. News that Thiel was investing in the cannabis space dates back to 2015, when Thiel’s company Founders Fund obtained a minority stake in Privateer Holdings, the same company that backs Tilray.

Since then, Tilray announced a definitive merger agreement with Privateer to extend the lock-up on, and provide issuance of up to 75 million Tilray common shares to Privateer’s equity holders, representing 77 percent of Tilray’s outstanding shares. Tilray survived the merger as a part of the deal.

Apart from medical cannabis, Tilray has also been forging its way into recreational marijuana. The firm entered the adult-use retail market when another of its wholly-owned subsidiaries, High Park Holdings, acquired cannabis retailer 420 Investments (FOUR20) in an all-share agreement valued at C$110 million. The deal brought with it the six brick-and-mortar cannabis stores FOUR20 has in Alberta.

Another of the firm’s acquisitions in 2019 was Manitoba Harvest, the world’s largest producer of hemp food products, according to Tilray. Manitoba Harvest distributes a variety of hemp-based consumer goods in over 16,000 stores across Canada and the US.

Tilray’s potential setbacks

As mentioned, Tilray’s massive bubble burst was a shock to the market and the recent summer slump facing the industry has somewhat cooled investor excitement.

Despite being bolstered by recent acquisitions and an increase in its presence in the recreational cannabis market, Tilray still struggled after its massive drop.

The stock was raked across the coals in August when Count Vertical Group analyst Gordon Johnson slashed his price target for the company to more than 85 percent below its stock price at the time due to its most recent quarterly report.

The earnings report from Tilray’s second quarter in 2019 raised alarm bells with analysts and investors. Though the company reported US$45.9 million in total revenue, it also reported net losses at US$35.1 million, a big jump from the losses of US$12.8 million from the same period in 2018. Tilray also incurred US$33.6 million in sales costs.

Johnson called the results “an unmitigated disaster.”

The results also revealed Tilray’s sizeable debt of US$425.4 million from issuing convertible notes, the money from which was used to fund Tilray’s ongoing deal making, like its Manitoba Harvest acquisition.

Cowen analyst Vivien Azer also cut her price target to US$60 down from US$150 in September. In a note to investors, Cowen said Tilray had “been the most impacted by weak industry supply as its asset-light model was initially overly reliant on third-party supply,” adding a lack of novel cannabis products would also drag the reputation of the company down.

Investor takeaway

Now that share prices have dropped, investors can decide whether Tilray’s position in the market makes it a good choice to add to an investment portfolio.

Would you invest in Tilray? If you have, do you think it’s time to buy or sell? Is it one of the cannabis stocks to watch? What other companies in the marijuana business are stocks to buy?

Tell us in the comments below.

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Tilray (NASDAQ:TLRY) is a licensed producer based in BC, Canada.

The company cultivates, processes and distributes cannabis to countries including Germany, the Czech Republic, Croatia, Cyprus, Chile, Argentina, Australia, New Zealand and Canada.

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Tilray (NASDAQ:TLRY) is a licensed cannabis producer in Canada. The company is American-owned, but is based in Nanaimo, BC.

It sells cannabis and cannabis-related products domestically in Canada, as well as to countries in Europe, the South Pacific and Latin America.

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Tilray (NASDAQ:TLRY) is an American-owned licensed producer based in Nanaimo, BC. The company produces an array of cannabis and cannabis-related products.

It sells domestically in Canada, and to many other countries around the world. In Canada, Tilray has been supplying the medical cannabis market for several years. While Tilray was founded five years ago, it remained privately owned until 2018.

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Cultures around the world have long reaped the benefits of marijuana. The Chinese used it for medical purposes for thousands of years, as did the Greeks and Egyptians. In fact, prior to the Marihuana Tax Act of 1937, the US recognized cannabis as an acceptable medical product.

Of course, more recently marijuana has been cast in a negative light, with laws prohibiting its use and distribution. But with Canada on the verge of nationwide legalization and many states in the US legalizing the substance, the stigma surrounding it has melted away once again.

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Canadian cannabis stocks have been booming in the last year, with investors clamoring to get into the space ahead of national legalization slated for this summer. Many marketwatchers are familiar with the big companies in the market such as Canopy Growth (TSX: WEED), Aurora (TSX: ACB) or Aphria (TSX:APH), to name a few. But, what about the small caps in the cannabis market?

Many investors prefer to watch smaller market cap companies  because of the potential for exponential return on investment. These stocks are no doubt somewhat risky, especially in such a volatile industry, but the gains can be explosive. So, which small market caps in the industry are worth taking a look at?

With so many to choose from, the Investing News Network (INN) has narrowed it down by selecting cannabis stocks with a market cap between roughly $15 million and $50 million. The companies below are listed from largest market cap to lowest market cap, with all numbers and figures current as of March 27, 2018.

See below to check out which penny cannabis stock might be your favourite.

1. Nanosphere Health (CSE:NSHS)

Market cap $51.87 million; current share price: $0.54

Nanosphere Health is actually a nano-biotechnology company with a cannabis division. The company’s flagship cannabis product is its Nanosphere delivery system, which improves the chemical compound’s absorption, and distribution in the body.

Nanosphere is focused on standardizing the results of ingesting edibles. In particular, the duration of time before the psychoactive effects kick in, as well as how much is absorbed. For this Nanosphere offers an intraoral product that dissolves within the mouth, and a internasal, in the nose. The cannabis stock won the Dope Cup award in 2017 for the best transdermal product.

2. FinCanna Capital (CSE:CALI)

Market cap  $50.11million; current share price: $0.72

FinCanna is a royalty company for the licensed medical cannabis sector. The Canadian cannabis stock is focused on the Californian medical market in the US, as its stock ticker would suggest. The company claims this is because the state is “the sixth largest economy in the world and the largest medical cannabis market in North America.”

Some of FinCanna’s royalty portfolio includes companies such as Cultivation Technologies, a cannabis producer whose Coachella facility will hand over 14 percent to FinCanna, and Green Compliance, a technology company specializing in point-of-sale software for cannabis merchants.

3. Kalytera (TSXV: KALY)

Market cap $46.04 million; current share price: $0.35

This cannabis stock is yet another pharmaceutical firm. Kalytera is presently at a clinical stage of cannabinoid therapeutic products. Kalytera is developing new CBD formulations to increase bioavailability of the compound, as well as to target specific diseases.

One such disease the company has targeted is Graft versus Host Disease (GvHD), occurring in patients who have undergone transplants. The company is developing a CBD compound to prevent and treat the illness. Kalytera is also focused on a non-psychoactive portfolio of patents and products, which includes synthetics.

4. Viridium Pacific Group (TSXV:VIR)

Market cap $45.12  million; current share price: $0.99

Viridium Pacific Group is headquartered in Calgary, AB, with a 8,300 square-foot indoor cannabis facility in Mission, BC. The Canadian cannabis stock is a parent company to a number of operating subsidiaries, one of which is licensed producer, Experion Biotechnologies in Abbotsford, BC.

5. Quadron Cannatech (CSE:QCC)

Market cap $29.09 million; current share price: $0.39

Quadron is focused on ancillary equipment, products, scientific services, as well as research and development for licensed producers. From extraction to processing, the cannabis stock has an array of products on offer.

It is a parent company to subsidiaries Greenmantle, Cybernetic Control Systems, and Soma Labs Scientific. Soma Labs is focused on its team’s expertise in CO2 extraction technology and products within that niche. Greenmantle specializes in consumption products like encapsulation products, as well as ancillary products like vaporizer pens. Cybernetic Control provides equipment to licensed producers. This includes machines for automation, to reporting systems, to robotics.

6. Veritas Pharma (CSE:VRT)

Market cap $24.23 million; current share price: $0.49

Veritas is sixth on our Canadian cannabis stocks list of small caps. Veritas is led by a team of scientists and makes emphasis to its research and development (R&D) side of the business. The company claims to take a three pronged approach to R&D, citing its first step to chemically profile cannabis cultivars, secondly to create a pharmacological profile for specific ailments, and finally to perform clinical trials. Veritas believes that this scientific approach will serve to validate cannabis treatments and thereby association will make its company a favourite for health professionals.

The company currently has a number of cannabis strains which are scheduled for human clinical trials later in 2018. The strains will be tested for treatment of chronic pain, nausea, and Post-Traumatic Stress Disorder.  

7. Lotus Ventures (CSE: J)

Market cap $26.39  million; current share price: $0.46

Lotus Ventures is next on our small cap cannabis stock list, and is based out of Vancouver, BC. This company has an application to become a licensed producer with the Access to Cannabis for Medical Purposes Regulations designation. The firm is building a 22,500 square foot facility in Armstrong, BC, which is due to be complete this spring.

Lotus has also partnered with Cannabis Wheaton Income (TSXV: CBW), and has received funds by way of private placement from the firm.

8. Global Cannabis Applications (CSE:APP)

Market cap $17.53  million; current share price: $0.30

Global Cannabis is a technology firm that offers its suite of tools for cannabis companies from production to retail. Its Citizen Green platform aggregates anecdotal and clinical trial data which then prequalifies candidates for clinical studies. The company suggests that this increases the speed and efficiency of the approval process for medical marijuana products.

The Citizen Green platform includes mobile apps and uses blockchain technology for its data collection, as well as its digital reward system which doles out digital coins to its members as part of its loyalty program.

9. Lineage Grow Company (CSE:BUDD)

Market cap 16.12 Million; current share price: $0.26

Lineage Grow develops state of the art cultivation facilities and craft cannabis. The company has opted for small batch production techniques such as its Deep Water Culture, and Precision Agriculture technologies. The company claims that these innovations create craft cannabis at a commercial scale and cost. Lineage uses sensors and probes, as well as automated grow systems to cultivate its cannabis.

10. Vodis Pharmaceuticals (CSE: VP)

Market cap $12.46 million; current share price: $0.32

The last cannabis stock on the list is Vodis Pharmaceuticals. The company has two facilities, one in Bellingham, WA, and the other in Delta BC. The company is currently awaiting its final inspection of its BC facility. Vodis describes itself as being “somewhere between a premium micro-brewery and a cutting edge pharmaceutical company.” The company owns 100 percent of its Vodis USA subsidiary, which has completed licensing of its second phase of facility expansion in Bellingham.

Which small cap cannabis stock is your top pick, and why?

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