Debra Borchardt
Canadian cannabis company Tilray Inc. has filed for an initial public offering to list its shares on NASDAQ using the symbol TLRY. Privateer Holdings will continue to own a majority of the voting power of all outstanding shares of Tilray’s capital stock and as such will be considered a “controlled company.” Privateer will own 75 million shares and have the majority of the voting power.
Tilray produces medical cannabis in Canada and Europe and has supplied high-quality cannabis products patients in 10 countries through its subsidiaries in Australia, Canada, and Germany and through agreements with established pharmaceutical distributors. In Canada, the company is also authorized to distribute certain products on a wholesale basis and to sell certain products directly to patients through its e-commerce platform or over the phone. While the company has made its name in medical marijuana, it is developing brands for the soon to be developed adult-use market. Prime Minister Trudeau set October 17 as the day for the first legal sales of recreational marijuana.
In the company filing, Tilray reported that revenue rose 62% from 2016’s C$12.6 million to 2017’s C$20.5 million. Revenue for the first quarter ending March 2018 saw an increase of 55% from C$5.0 million to C$7.8 million.
The net loss for 2017 was C$7.80 million, a slight improvement over the net loss in 2016 of C$7.88 million. The company reported a net loss per share in 2016 of 11 cents and that improved slightly to a net loss of 10 cents for 2017. The net loss though for the first quarter ending March 2018 jumped greatly to C$5.1 million versus the net loss for the first quarter in 2017 of C$679,000. Tilray has an accumulated deficit as of March 31, 2018, of $45.6 million and cash and cash equivalents of C$12.1 million.
The company sold 36% more kilograms of cannabis in 2017 over 2016 and it harvested over 50% more in 2017 versus the previous year. The average selling price per gram grew 21% to C$6.52 from C$5.41 and the average cost per gram sold fell 30% to C$2.84 in 2017 from C$4.04 in 2016. In the filing, Tilray said that for the three months ending March 31, 2017, and 2018, kilograms harvested decreased by 9% primarily due to shifting some of its cultivation mix towards higher potency strains and CBD strains, which have lower biomass yields compared to mid-potency strains.
The proceeds are intended to further develop the cultivation and processing capacity. It plans to fund the build-out of the cultivation and processing capacity at the Enniskillen, Ontario, London, Ontario, and Cantanhede, Portugal facilities. Also, it will also repay outstanding principal and interest under the Privateer Holdings debt facilities. As of March 31, 2018, there was $34.6 million outstanding under the Privateer Holdings debt facilities and the interest rate was 2.54% for 2017.
In February 2018, Tilray submitted an ACMPR license application for its proposed facilities in London, Ontario, and the High Park Processing Facility. This application has not yet been approved, although it is anticipated.
According to a company statement, Cowen and BMO Capital Markets will jointly act as book-runners for the proposed IPO. Cowen will act as the sole book-running manager for the IPO in the United States, and BMO Capital Markets will act as the sole book-running manager for the IPO in Canada. Eight Capital will act as a lead manager for the IPO in Canada. Roth Capital Partners will act as a lead manager and Northland Capital Markets will act as a co-manager for the IPO in the United States.
