On March 3, I made a bullish call on both Tilray (NASDAQ:TLRY) and its longtime Canadian cannabis-market competitor, Aphria (NASDAQ:APHA). Today I’m going to double down on those calls and recommend that investors take a long position in TLRY stock.
And I also recommend that you mark April 14, 2021 on your calendar because it could be a game-changing day in the history of the global marijuana business.
For all we know, that day could turn out to be a great big “nothing burger.” Or, it could catalyze TLRY stock, sending it back up to its February peak.
Either way, you might want to place your bets now instead of just sitting on the sidelines. At the very least, you should be closely watching the events unfold, since a cannabis-market behemoth could soon emerge.
A Closer Look at TLRY Stock
So let’s talk about what happened in February. On the tenth day of that month, TLRY stock shot up to a 52-week high of $67.
This move is all the more impressive when we consider that the share price started off 2020 at around $9. But then, Tilray is known to be a high-beta stock.
More specifically, TLRY stock has a five-year monthly beta of 2.86. What this means is that the stock has historically tended to move nearly three times as fast as the overall stock market.
So if you’re going to invest in marijuana stocks – even the biggest and most famous names in the sector – you’ll need to brace for volatility. As a result, I wouldn’t recommend pouring a large portion of your investment account into any single marijuana stock.
In any case, in mid-afternoon trading, TLRY stock was changing hands for $19.85. So its bullish momentum has cooled off after the February surge.
Yet an imminent event could catalyze the bulls and possibly even send the share price back to its prior peak.
The Big Day
What’s so special about April 14? That’s the day when Aphria will host a special shareholder meeting to (hopefully) approve its merger with Tilray.
The special resolution, which the accompanying press release called the “Aphria Resolution,” would need to be approved by at least two-thirds of the votes cast.
Sorry, Tilray shareholders, but only Aphria shareholders will be able to vote on the “Aphria Resolution.”
However, there will reportedly also be a “Tilray Meeting.” During this meeting, Tilray’s shareholders will be asked to vote on a number of proposals. For most retail shareholders, the two most interesting proposals will probably be measures that would:
- Increase the authorized capital stock of Tilray from 743,333,333 shares to 900 million shares
- Issue Tilray shares to Aphria shareholders
If all goes according to plan, the combined company will simply be called Tilray, Inc. and will trade on the Nasdaq Exchange under the symbol, “TLRY.”
A Momentous Occasion
Obviously, this is no ordinary shareholder meeting because there will be a whole lot at stake there.
It’s so momentous, in fact, that there’s a separate website dedicated to the merger. On the home page of the website, a message states that the deal will result in the creation of “the largest global cannabis company by revenue.”
How big will the combined company be? Tilray’s press release asserts that it will have “pro forma revenue of US$685 million… for the last 12 months as reported by each company prior to the date of the announcement of the Transaction on December 16, 2020.”
Moreover, within two years of the transaction’s completion, the combined company is expected to deliver approximately $78 million of “annual pre-tax cost synergies.”
But then, we first have to see what happens on April 14. It’s always possible that the meeting could yield unexpected results.
On the other hand, I wouldn’t wager on a defeat of any of the aforementioned proposals. In all likelihood, the proposals will easily pass.
The Bottom Line
Soon the world will bear witness to a historic moment in the Canadian cannabis industry. Are you ready for it? You still have time to take a position in TLRY stock before the big day
It’s possible that the share price could return to its previous peak. Or a successful business combination with Aphria might already be priced into the shares. Therefore, given the potential for volatility and unexpected outcomes, it’s best to keep your position size small.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.