Shares of Tilray Inc. (TLRY) skyrocketed this week after the British Columbia-based company announced it received an approval from the Drug Enforcement Administration (DEA) to import marijuana to the United States for medical research. Since hitting the U.S. public market on the Nasdaq with an initial public offering (IPO) price of $17 in July 2018, Tilray shares have risen in excess of 1,300%, compared to the S&P 500's 3.3% return over the same period. Tilray's recent surge has led the company to surpass Ontario, Canada-based Canopy Growth Corp. (CGC) to become the world's largest cannabis company with a market capitalization at roughly $14.4 billion.
Thiel-Backed Fund Sees Big Gains
Tilray's rally has lined the pockets of a Seattle-based private equity fund backed by billionaire entrepreneur and angel investor Peter Thiel. An early investor in cannabis ventures, Privateer Holdings, holds a 76% stake in Tilray, now worth approximately $12 billion, as reported by Bloomberg. When including Tilray's unlisted Class 1 shares, Privateer's stake rises to almost 75 million shares, worth nearly $15 billion.
In December 2014, Thiel's Founders Fund became the first institutional investor in the cannabis industry through Privateer Holding's $75 million Series B funding round, according to the private equity firm's website. Thiel, who founded e-payments pioneer PayPal Holdings Inc. (PYPL) in the 90's, is known for his bold investments, backing industry disrupters such as Facebook, sharing economy giant Airbnb, Elon Musk's aerospace company Space Exploration Technologies Corp., and ride-sharing platform Lyft Inc. (See also: Top Marijuana Private Equity and Venture Capital Funds)
Tilray Burns Short Sellers
While Tilray posted just $20 million in revenue for 2017, bulls view the expected legalization of cannabis in Canada and new interest in the weed market from blue chip consumer companies like Coca-Cola Co. (KO) and Diageo Plc. (DEO) as representing long-term revenue growth opportunities. In a recent interview in New York, Chief Executive Officer (CEO) Brendan Kennedy indicated that rather than being taken over by a larger corporation, he envisions his company warranting a $100 billion market value on its own, as reported by Bloomberg.
Tilray currently focuses on medicinal marijuana in 12 countries across five continents. In Canada, the firm has inked deals with pharmacies such as Shoppers Drug Market to sell its cannabis products.
"Our long-term vision is if a patient walks into any pharmacy in any country in the world that has legalized cannabis that patient should be able to obtain a Tilray product. That’s our global goal,” said Kennedy told Bloomberg.
Not all are so bullish on the Canadian weed producer. Prominent short seller Citron Research stands firm in its bet against Tilray, writing that the stock's valuation is "beyond comprehension" in a tweet on Wednesday.
Tilray shares are up 52% as of Wednesday afternoon at $268 per share. Short sellers have been burned by the stock's recent strength, as the limited number of its shares also add to the stock's volatility.
(See also: Marijuana ETF Attracts $22 Million in August.)