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Tilray: Struggling Cannabis Giant Needs A Turnaround

May 05, 2020 9:00 AM ETTilray Brands, Inc. (TLRY), TLRY:CA11 Comments
J Cooper profile picture
J Cooper


  • Tilray reported $180 million in impairment costs in the fourth quarter.
  • Tilray suffers from poor gross margins and very high operating costs.
  • Despite this, Tilray trades at a slight premium to other Canadian cannabis companies.
  • It is unclear what Tilray has done to warrant this premium pricing, but I do not plan to pay a premium to invest in this troubled company.
  • This idea was discussed in more depth with members of my private investing community, The Growth Operation. Get started today »

Tilray reported unusually high gross and operating costs due to impairment of inventory and other assets.

Tilray reported unusually high gross and operating costs due to impairment of inventory and other assets. Source: Author based on company filings.


Tilray (NASDAQ:TLRY) is a Seattle-based Canadian cannabis company which generates about two-thirds of its revenue from cannabis sales and one-third from hemp food products. After a monstrous stock price run-up in late 2018, Tilray's shares have been in continuous decline, dropping over 97% from their intra-day $300 high.

Tilray's financial performance has not been impressive. While the company has grown its revenue, it also suffers from poor gross margins and very high operating costs. In the fourth quarter, Tilray recorded $180 million in impairments of inventory and assets. Even without that impairment, the company would have reported its worst-ever operating loss due to low margins and high spending. Among other costs, Tilray has rewarded its management with $61 million in compensation over the past two years. These costs have contributed to a rapidly-collapsing cash position, with cash falling from $517 million to $97 million in one year. Tilray also owes $450 million in debt due in 2023.

Despite this, Tilray trades at a slight premium to other Canadian cannabis companies. It is unclear what Tilray has done to warrant this premium pricing, but I do not plan to pay a premium to invest in this troubled company.

Seattle-based Canadian Cannabis Producer

Tilray is a U.S.-owned cannabis company which is ostensibly headquartered in Nanaimo, BC, but is run out of Seattle, WA. The company was founded by, is run by leadership from, and was majority owned by Privateer Holdings, a Seattle-based venture capital firm. Tilray and Privateer were merged in December, allowing Privateer's owners to own Tilray shares directly. These shares represent 77% ownership of Tilray and are subject to a two-year lockup agreement ending in December

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The Growth Operation is the largest community of cannabis investors on Seeking Alpha. During difficult market conditions, our active chat room and daily news updates help investors make sense of the rapidly-evolving cannabis market. The Growth Operation also includes interactive data, illustrating market sales trends and highlighting companies with best-of-breed financial performance.


This article was written by

J Cooper profile picture
I used to run a Marketplace service called The Growth Operation.  That service has subsequently been moved to Julian Lin, who is highly-skilled in analyzing and evaluating the cannabis investing marketplace.Julian has renamed the service to The Weed Investors, and it promises to continue to be a great resource and community for investors interested in this growing sector.  I am a contributor to Julian's The Weed Investors community.Thank you to each and everyone who previously subscribed to The Growth Operation.  I appreciate all of your support.-J. Cooper

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (11)

$cnfa....what is that?
crzulu prime profile picture
Dump Tilray Stock as an Act of Protest
The company's lousy fiscal performance is more than enough reason to sell TLRY stock


The Gross Law Firm Announces Class Actions on Behalf of Shareholders of TLRY, INO and BIDU
Published: May 5, 2020 at 5:35 p.m. ET

OneStrawRevolutionFarming2023 profile picture
One of the biggest problems might be how they see themselves as participants in the Wellness industry: these Yalies don't want to be farmers and get their fingernails dirty :-)
SantiagoCrawford profile picture
Long some $TLRY here. Thinking it pops back up tomorrow and recovers a bit. Probably keep a real tight stop. This stock has treated me well so far.
wilkinson99 profile picture
Consolidating right under the 50 day moving average and cloud resistance. A breakout of this area would create targets in the $11-$12 area, 40-50% from current levels. Currently long $TLRY and $CNFA. I'm Pretty confident that $CNFA has broken out here and can get near $0.90 as a first price target (within this week) with $1 being the next target. Increased volume is a confirmation of this breakout.
J Cooper profile picture
I don't personally use/follow technical analysis, but best of luck and I hope it works out well. :-)
OneStrawRevolutionFarming2023 profile picture
@wilkinson99 55 acres, topicals, tinctures/CBD Gum, and at $0.55 a share? There must be a NY/NJ metro area premium for this company :-)

IF the gum becomes popular than CNFA might do well; on the other hand, hemp products can cross state borders so consumers will likely buy from an assortment of gum brands :-)

That CNFA has not entered the smokable medicinal hemp sector is a bit curious given how that is growing visibly and discernibly from coast to coast :-) Here are some in North Carolina (pending a proposed ban in the future on smokable hemp perhaps):



CNFA might be going through a fast and wonderful start but it might not be able to support that share price much longer unless, on the other hand, it has timed everything perfectly to dovetail into the outputs and revenues for this growing season :-)

55 acres is substantial but there are other companies that purportedly have more acres and aren't valued as highly, such as EXDI :-)

The amazingly talented shorts might have to play around with this one before the price solidifies unless the wonderful folk CNFA have planned and gotten lucky to time things perfectly as the growing season ramps up :-)

Best wishes to CNFA and their shareholders; its been fun to watch so far but a bit too "spendy" for me as they say here in Oregon :-)
wilkinson99 profile picture
@RegenerativeLiveSoilFarming2020 CNFA’s expertise is not in grow... they have a proprietary method of direct to consumer sales, which is what everyone is looking for. They are a nutraceutical company first, with Managment having more than 20 years experience in DTC sales, and in this environment its what all these companies are lacking! Its not the grow that we have to invest in, its someone having the ability to sell and generate bottom line!
The sector is down because of biomass and price of oil down by 40%, lets try to get involved in companies that concentrate on selling the end product and have strong distribution, and these days if someone has a strong online presence with distribution expertise... win win!
cesaronofri profile picture
Hi Jonathan . great comment .. Could you talk something of KERN ? I 'm long on AKERNA, Thanks
J Cooper profile picture
It's flying under my radar. At a $92 million market cap (on Seeking Alpha), it's pretty small for full coverage.
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