Yesterday Citron Research announced that it was shorting Tilray, naming it the most expensive stock in the cannabis space. Last week Citron came out stating an aggressive short position against Cronos which we wrote two articles about.



How Did We Get Here?

Tilray has generated a lot of hype since its NASDAQ debut in jult. Seattle based cannabis cultivator Tilray Inc. generated $7.8 million USD revenue in Q1 of 2018 before going public. Their IPO (originally planned at $17.00 a share on the initial 10-k statement, later raised to $22.00) at this price the stock was an attractive buy, Tilray is now trading at $93.30. The company had proven it could grow its own product and sell it in multiple international markets. Beyond flower the company also had high margin CBD products that retail for upwards of $400.00 per bottle.

The 75 million Tilray shares that went public in the July IPO are worth 1/10th the vote of the 16.6 million.  The shares that are owned by the founders at Privateer Holdings, a Seattle based equity fund run by Tilray’s CEO Brendan Kennedy. Those shares and 58,333,333 of the listed B shares, Privateer Holdings controls 93% of the Tilray voting power.

More on Tilray’s share structure:

Devil’s Advocate: Tilray Does Have A Lot of Value

Tilray currently operates a 60,000 sq/ft growing facility in Nanaimo, BC and are also constructing a 566,000 sq/ft greenhouse Enniskillen, Ontario and a 56,000 sq/ft processing facility in London, Ontario,  totalling 912,000 sq/ft of licensed facility space by the end of 2018, when the company expects to be fully expanded.

Source: Equity Guru


Verdict: Tilray Is Grossly Overvalued

Tilray boasts great sales and production numbers, but on a deeper level, the amount of equity investors actually receive within each Tilray share is minimal compared to its competitors.

Tilray’s price/book ratio is currently 203.6, while their price/sales is 251.8, (more on what that means below the chart)

The lower these ratios are, the less inflated share price and the more value investors get when buying shares.  For conservative investors like Warren Buffett, if these two numbers multiplied together equal more than 22.5 he will not buy the stock, Tilray’s amount to 51,266.

It’s understandable that many cannabis investors are not conservative investors and do agree to take an amount of risk when investing. Here are Tilray’s current fundamentals matched with its competitors.

Company Market Cap
(Billions $CAD)
Price/Book Price/Sales
Canopy 14.5 12.3 145.8
Tilray 8.3 203.6 251.8
Aurora 8.3 6.2 87.3
GW Pharma 4.1 8.2 232.8
Aphria 3.9 3.3 83.4
Cronos 3 11.4 309.2
CannTrust 1.1 6.1 18.5
Hexo 1.1 3.5 71
TGOD 1.6 5.4 /



Price/book ratio = market price per share / book value per share

Companies use the price-to-book ratio to compare a firm’s market to book value by dividing price per share by book value per share. Some people know it as the price-equity ratio.

In this equation, book value per share =  (total assets – total liabilities) / number of shares outstanding

A lower P/B ratio could mean the stock is undervalued.

Price/sales ratio = market cap / annual sales

The price-to-sales ratio is a valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the value placed on each dollar of a company’s sales or revenues. It can be calculated either by dividing the company’s market capitalization by its total sales over a 12-month period.

Like all ratios, the price-to-sales ratio is most relevant when used to compare companies in the same sector. A low ratio may indicate possible undervaluation, while a ratio that is significantly above the average may suggest overvaluation.