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Tilray: Not A Buy On Aphria Deal Close


  • Tilray and Aphria are set to approve the merger at shareholder meetings next week.
  • The stocks are up substantially since the deal announcement, yet the prospects of the business haven't improved meaningfully.
  • The new entity isn't the cannabis market leader needed to justify a $9+ billion market valuation.
  • Looking for a helping hand in the market? Members of Out Fox The Street get exclusive ideas and guidance to navigate any climate. Learn More »

Next week, Tilray (NASDAQ:TLRY) and Aphria (APHA) will host stockholder meetings to approve the proposed Canadian cannabis merger. The stocks are up substantially since the deal was announced back in December. My investment thesis remains bearish on the stock, especially due to the excessive rally.

Image Source: Tilray website

Deal Closing

Back in December, Tilray entered into a definitive agreement to acquire Aphria in a deal with a listed market valuation of ~$4 billion, at the time. Aphria shareholders will receive 0.8381 shares of Tilray and end up controlling 62% of the company.

With Tilray trading at $21.00, the deal values Aphria at $17.60 per share. Aphria shareholders will see a very small boost when the deal finally closes after the shareholder votes next week.

The combined company now has a listed market value in the $9+ billion range with the stock price surges following the Blue Sweep in the U.S. November elections. The new Tilray is now one of the most valued cannabis stocks in the world with Canopy Growth (CGC) worth $12 billion and Curaleaf Holdings (OTCPK:CURLF) worth $10 billion.

Data by YCharts

The prospects for the company haven't changed much since the deal announcement. The 2022 revenue estimates for the Tilray business are actually down ~$8 million to $375 million since the Q4 earnings announcement in February.

Source: Seeking Alpha earnings revisions

Aphria has seen revenue estimates rise due in a large part to improving revenues from the distribution business. The investment picture hasn't gotten any better for Tilray and Aphria, yet the stocks are up substantially.

Not A Market Leader

Aphria was a Canadian cannabis stock that was appealing long before the Tilray deal was announced, but the new Tilray isn't the market leader needed to justify the current market valuation. The combined company presented this misleading picture

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This article was written by

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Stone Fox Capital Advisors, LLC is a registered investment advisor founded in 2010. Mark Holder graduated from the University of Tulsa with a double major in accounting & finance. Mark has his Series 65 and is also a CPA.

Stone Fox Capital launched the Out Fox The Street MarketPlace service in August 2020.

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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.

The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock, you should do your own research and reach your own conclusion or consult a financial advisor. Investing includes risks, including loss of principal.

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