Tilray’s wild Wednesday, with trading halted five times, leaves many investors questioning marijuana stocks
Tilray Inc. (NASDAQ:TLRY) stock prices rattled the marijuana stock market on Wednesday as shares were halted five times within an hour near the end of trading, at one point hitting an intraday high of $300 per share. The final result for cannabis’ new number company was a 38 percent increase, as Tilray closed out the day at $214.06 in what’s becoming a typical rollercoaster ride for investors.
Some experts attribute the wild price swings to a recent interview company CEO Brendan Kennedy gave “Mad Money’s” Jim Cramer on Tuesday night. "Cannabis is a substitute for prescription painkillers, prescription opioids, and so if you're an investor in a pharmaceutical company or you're a pharmaceutical company, you have to hedge the offset from cannabis substitution," Kennedy told Cramer.
Whatever the reason, it was a swing the likes of which cannabis stocks have never seen.
Tilray stock flew too close to the sun
Investors were flying high on Wednesday around 2:50 P.M. when Tilray shares hit near $300 — a near 94 percent gain that followed their already massive 400 percent increase for the month. At 3:33 P.M trading was halted for the fourth time in 40 minutes, with stock prices “languishing” at $168.33.
Trading then resumed 10 minutes later, and shares gained another 40 percent, upon which time they were halted again. They resumed for a fifth and final time just before the closing bell, closing out the day at $214.06. The whole thing is quite remarkable considering the fact that Tilray went public this summer at just $17 per share. Already, they have displaced Canopy Growth Corporation (TSX:WEED) (NYSE:CGC) as the number one cannabis company in the world.
In fact, on Wednesday Tilray became a bigger company than American Airlines.
Volatility the likes of which has never been seen in the industry
As some experts pointed out after hours on Wednesday, Tilray’s volatility is due to a number of mitigating factors. The company only has 17.8 million public shares available for trade. Compare that to this week’s other big headline-maker, Aurora Cannabis (TSX:ACB) who also set the market ablaze with the news of their possible deal with Coca-Cola. Aurora has 912 million shares. Fewer shares make it easier to push the price higher artificially.
According to the experts, however, Tilray’s small float is about to end, with their lockup period finished 180 following their IPO. Soon insiders and institutional investors can openly trade their stock. Privateer Holdings owns 75 million shares, and apparently, there are more unknown investors as well.
The sector has been over-eager ever since Constellation Brands bought heavy into Canopy Growth last month. Moreover, Tilray, along with Canopy and Cronos Group (NASDAQ:CRON) is one of the few marijuana stocks plays on a U.S. exchange. It’s looking more and more like there’s a bubble on the horizon.
Tilray shares shot down in after-hours trading, losing just under 7 percent by 8:00 P.M. Eastern.