Why Has Tilray Been Such A Buzzkill?

I certainly don’t claim to be any kind of a Market Guru or Super Genius, but in my more then 20 years as a hedge fund trader I picked up a thing or two along the way. One of the things that I learned early on is that when the blame game starts getting played, it’s typically not a good sign for the future prospects of a company. So when I read recent statements from Tilray’s CEO, it caught my attention.

If you are an investor in Marijuana stocks I am sure you are familiar with Tilray’s story. The IPO was widely hyped last summer and there appeared to be significant institutional interest in the stock. Major firms like Cowen and BMO backed it. Between August and October the price rose by 1,000%!

But things have not worked out so well since then. The stock traded above $200 in October but has since fallen to around $45. In the last three quarters, TLRY has reported losses of (.20), (.33), and (.32) respectively. That brings us to where we are now.

Brendan Kennedy is the CEO of Tilray. The company just reported growth that was less then had been estimated in its recent earnings release. Mr. Kennedy says this is because the suppliers that they purchase from have not been able to grow enough marijuana. He went so far as to accuse them of lying. “Some of them were lying about their funded capacity,” Kennedy said.

Of course, as CEO of one of the largest and most influential Marijuana companies, he should have been aware of this. Maybe he needs to surround himself with more insightful people.

Then Mr. Kennedy also said something that makes me think that he likes to use his company’s product. According to the release, the company sold the equivalent of 3,012 kilograms of pot. Kennedy thinks that this is type of measurement is a ‘strange metric’. In an interview with Marketwatch.com he said that after edible sales begin in Canada later this year and that the number of kilograms sold would become “irrelevant” to investors.

What? Are you kidding me? Dude. How could the amount of a product that a company sells be irrelevant?

And then something else also caught my attention. The company made a large acquisition and claims that it was not required to disclose the targets financial performance or break out how it will contribute to the company’s top or bottom line.

This is from the 8-K which was filed on February 15th::

“As reported in a Current Report on Form 8-K filed by Tilray, Inc. (“Tilray”) on March 4, 2019, Tilray completed the acquisition of Natura Naturals Holdings Inc. (“Natura”) on February 15, 2019. The acquisition of Natura is an acquired business pursuant to Regulation S-X Section 210.11-01(d). However, Tilray reevaluated “significance” of the acquired business using Tilray’s financial statements for the year ended December 31, 2018, as included in Tilray’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 25, 2019.

As a result of such reevaluation, Tilray has determined that audited financial statements and unaudited combined pro forma financial statements are not required under Regulation S-X.

This Form 8-K/A is being filed solely to amend the disclosure set forth Item 9.01 of the Form 8-K filed on February 15, 2019 to state that no historical financial statements of Natura or related combined pro forma financial information are required to be filed.”

This lack of disclosure seems highly unusual to me. This is especially true for a new company that is being closely scrutinized by disappointed investors.

So we have a company that isn’t accepting responsibility for it’s poor performance, a CEO who doesn’t seem to care about how much of the product the company is selling, and an admitted lack of disclosure.

Tilray has certainly been a buzzkill for it’s shareholders. Based on what I have seen I don’t expect that to change anytime soon.