Why Tilray Stock Rose Today

Shares ofTilray (NASDAQ:TLRY) climbed on Wednesday after the Canadian cannabis company announced a deal with American marijuana retailer MedMen Enterprises (OTC:MMNFF). By the close of trading, Tilray’s stock price was up 1.1% after rising as much as 7.2% earlier in the day.

So what

Tilray agreed to purchase MedMen’s convertible notes from private equity firm Gotham Green Partners. The deal could position Tilray to quickly enter the U.S. market should federal legalization progress.

“Backed by accelerating trends toward legalization globally, we are focused on building the world’s leading cannabis-focused, consumer-branded company with a goal of $4 billion of revenue by the end of our fiscal 2024,” Tilray CEO Irwin Simon said in a press release. “The investment we are announcing in MedMen securities today, one of the most recognized brands in the $80 billion U.S. cannabis market, is a critical step toward delivering on our objective.”

A person is holding a cannabis leaf in front of a U.S. flag. g.foolcdn.com/image/?url=https%3A//g.foolcdn.com/editorial/images/639867/cannabis-stocks-marijuana-gettyimages-1227117638.jpg&w=1000&op=resize 1000w, g.foolcdn.com/image/?url=https%3A//g.foolcdn.com/editorial/images/639867/cannabis-stocks-marijuana-gettyimages-1227117638.jpg&w=2000&op=resize 2000w”/>

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Under the terms of the deal, Tilray and other investors will establish a limited partnership that will purchase roughly $165.8 million of MedMen’s debt and warrants. Tilray’s stake in the limited partnership will essentially give it the right to acquire 21% of MedMen’s Class B shares.

Now what

Tilray would like to pay for the deal in stock. Management is asking its investors to authorize the issuance of 9 million shares at its meeting tomorrow. If Tilray’s stock owners vote no, the company could be forced to pay in cash.

“Our ability to maximize value from this game-changing transaction rests on the support of our shareholders,” Simon said.

This article represents the opinion of the writer, who may disagree with the official recommendation position of a Motley Fool premium advisory service. Were motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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