Tilray is having a wild week. Is this a bubble for cannabis stocks?

Canadian cannabis stock Tilray has, to put it mildly, been on a strange trip.Tilray's moves have been...

Posted: Sep 20, 2018 6:30 PM
Updated: Sep 20, 2018 6:30 PM

Canadian cannabis stock Tilray has, to put it mildly, been on a strange trip.

Tilray's moves have been wackier than anything Harold and Kumar experienced on their trip to White Castle or Seth Rogen and James Franco's adventures in "Pineapple Express."

Shares of Tilray have shot up nearly 50% in the past week, surging nearly 40% alone on Wednesday — a day when the stock was halted five times in the final 70 minutes of trading on the Nasdaq for volatility.

The stock was up more than 90% at one point Wednesday and also dived into negative territory before recovering. Shares remained volatile Thursday, alternating between double-digit gains and sizable losses. It was down about 20% in midday trading.

But following the moves of the past week, Tilray's market value is a staggering $16 billion. It is worth more than Molson Coors, Macy's, Tiffany and casino giants MGM and Wynn.

Not bad for a company that just went public in July, isn't profitable and is only expected to generate sales of $41 million this year.

So why has Tilray, which is backed by Peter Thiel's venture capital firm Privateer Holdings, suddenly become a Wall Street darling?

Medical marijuana in the US could mean big bucks for pot stocks

The company's CEO, Brendan Kennedy, appeared on CNBC's "Mad Money" on Tuesday and told host Jim Cramer that cannabis is a "great hedge" for alcohol companies as more countries legalize recreational use of pot.

Kennedy also noted that cannabis is being viewed as a substitute for painkillers and other prescription drugs. So it might make sense for pharmaceutical firms to invest in cannabis.

To that end, Tilray also announced Tuesday that the US Drug Enforcement Administration had approved a plan for Tilray to import a cannabinoid capsule to America.

The drug will be used in a clinical trial at the University of California San Diego for the treatment of essential tremor, a neurological disorder.

Another drug company, UK-based GW Pharmaceuticals, has already received approval from the FDA for the cannabis-based drug Epidiolex to treat seizures.

Shares of GW Pharmaceuticals were up 10% Thursday and are up nearly 20% in the past week. But Tilray and GW Pharmaceuticals aren't the only cannabis stock that have been surging lately.

Legalization in Canada coming, but is the rally almost over?

Canadian company Canopy Growth has soared thanks to a $4 billion investment from Corona owner Constellation Brands and plans for the companies to develop cannabis-based beverages.

Canada's Aurora Cannabis surged this week, too, on reports that Coca-Cola is considering making cannabis infused drinks with it.

And Cronos Group is up more than 30% in the past five days after it announced it was working with Canadian medical clinic company Aleafia Health on a study that would use medical marijuana to treat insomnia and other sleep disorders.

Canada is set to legalize pot for recreational use next month as well. That's also fueling the surge in pot stocks.

But some experts worry that marijuana mania is another bubble in the making, just like dotcoms in the late 1990s, financial stocks in 2008 and bitcoin earlier this year. Those stories never end well.

Many short sellers, investors who bet that a stock will go down, are building big positions in Tilray and other cannabis stocks.

"The cannabis rally may be on its last drags," said Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners, a research firm that focuses on short selling, in a report this week.

Even pot industry bulls are getting nervous.

Micah Tapman, managing director of CanopyVentures, a private equity firm focused on the cannabis industry that has invested in marijuana market research firm BDS Analytics, told CNNMoney investors are getting a little too optimistic about Tilray.

He said it's a classic case of FOMO — the fear of missing out. And he warns that unless the US legalizes marijuana for recreational use, the current prices of most pot stocks are now way too high.

"There is no basis in reality for these valuations," Tapman said. "They are not necessarily bad companies. But the projections are delusional."

West Lafayette
Partly Cloudy
74° wxIcon
Hi: 76° Lo: 63°
Feels Like: 74°
Kokomo
Partly Cloudy
76° wxIcon
Hi: 75° Lo: 62°
Feels Like: 76°
Rensselaer
Partly Cloudy
73° wxIcon
Hi: 76° Lo: 61°
Feels Like: 73°
Fowler
Partly Cloudy
74° wxIcon
Hi: 74° Lo: 61°
Feels Like: 74°
Williamsport
Partly Cloudy
70° wxIcon
Hi: 73° Lo: 63°
Feels Like: 70°
Crawfordsville
Partly Cloudy
73° wxIcon
Hi: 71° Lo: 61°
Feels Like: 73°
Frankfort
Partly Cloudy
73° wxIcon
Hi: 73° Lo: 61°
Feels Like: 73°
Delphi
Partly Cloudy
75° wxIcon
Hi: 77° Lo: 63°
Feels Like: 75°
Monticello
Partly Cloudy
75° wxIcon
Hi: 80° Lo: 65°
Feels Like: 75°
Logansport
Partly Cloudy
73° wxIcon
Hi: 76° Lo: 61°
Feels Like: 73°
Comfortable weekend with a few spotty showers & t'showers...
WLFI Temps
WLFI Planner

Indiana Coronavirus Cases

Data is updated nightly.

Cases: 771299

Reported Deaths: 14005
CountyCasesDeaths
Marion1059471808
Lake570611031
Allen43193700
Hamilton37458426
St. Joseph37420568
Elkhart29819471
Tippecanoe23584231
Vanderburgh23431405
Porter19616327
Johnson18899394
Hendricks18168323
Clark13623199
Madison13604348
Vigo12908256
Monroe12626178
LaPorte12594225
Delaware11183198
Howard10747237
Kosciusko9810124
Hancock8799150
Bartholomew8296157
Warrick8150157
Floyd8072183
Grant7397181
Wayne7254201
Boone7236105
Morgan6948143
Marshall6358117
Dubois6301118
Cass6110112
Dearborn604078
Noble603590
Henry5971111
Jackson518677
Shelby512898
Lawrence4961127
Gibson467296
Montgomery461392
Clinton458455
DeKalb458485
Harrison456977
Huntington421382
Whitley418645
Steuben412861
Miami407273
Jasper402556
Knox393191
Putnam386862
Wabash371684
Adams355356
Ripley352771
Jefferson347187
White340954
Daviess3098100
Wells304881
Greene295985
Decatur293493
Fayette287464
Posey285435
Scott283458
LaGrange278472
Clay276049
Washington255637
Randolph248283
Jennings240449
Spencer239731
Fountain237250
Starke230859
Owen224759
Sullivan222943
Fulton209545
Jay203432
Carroll198822
Orange192756
Perry191939
Vermillion181944
Rush178627
Tipton173848
Franklin173035
Parke156816
Pike143434
Blackford138232
Pulaski124048
Newton123736
Benton110515
Brown106443
Crawford106316
Martin92715
Warren88015
Switzerland8488
Union73710
Ohio58411
Unassigned0429

COVID-19 Important links and resources

As the spread of COVID-19, or as it's more commonly known as the coronavirus continues, this page will serve as your one-stop for the resources you need to stay informed and to keep you and your family safe. CLICK HERE

Closings related to the prevention of the COVID-19 can be found on our Closings page.

Community Events