Why Tilray Stock Tumbled Last Month
Yahoo Finance ·
Tilray Brands ( TLRY 1.48% ) doesn't, to put it politely, have a history of pleasing its investors. That was well in evidence across June, as the company -- diversifying from its roots as a pure-play marijuana business -- fell into one of its more unattractive habits, announced a new acquisition, and saw an analyst cut his price target on the shares. The combination of these developments pushed Tilray's stock down by nearly 19% that month. Over the course of its existence, the chronically loss-making Tilray has often issued new shares in order to bolster its finances. Sure enough, on two separate days in June -- one close to the start of the month, and one at the end -- the company divulged chunky stock flotations. It minted just over 1.2 million new shares in the first, and an additional 2.6 million-plus in the second. What makes the pair something of a departure for Tilray is that they weren't effected to raise capital. Instead, they were the equity side of a debt-for-equity swap the company effected with holders of some of its convertible notes (i.e., debt securities that convert to stock under certain conditions) that pay interest of 5.2%. As notes are booked as debt on the balance sheet, with this financial engineering move Tilray retired roughly $18 million in debt. That'll improve the balance sheet to a degree (the company had $284 million in long-term borrowings at the end of February) which is, of course, a positive development. What's not so positive is the pile of new shares, as one reason investors have been wary of Tilray is its frequent new share issues. At least the June pair isn't excessively dilutive; the company's outstanding share count topped 123 million.
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