Tilray (TLRY) Buys a Foothold in the US Market, BofA Securities Explains the Rationale

August 18, 2021 7:43 AM EDT
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Price: $4.55 -2.36%

Rating Summary:
    4 Buy, 15 Hold, 4 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 11 | Down: 19 | New: 11
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BofA Securities analyst Heather Balsky reiterated a Buy rating and $21.50 price target on Tilray (NASDAQ: TLRY) after the company announced that it formed a limited partnership with other strategic investors to acquire a 75% interest in MedMen’s senior secured convertible notes ($165.8mn in principal) and warrants. The notes are callable six months following US de-scheduling/legalization and represents a 21% interest in MedMen’s voting shares. Tilray’s strategic rationale was to acquire conditional interest in a relatively strong US brand at a discount.

The analyst stated "The transaction will give the company a foothold into the US market and opens the door for distribution opportunities with MedMen in Canada and Europe (albeit not part of the initial agreement). Tilray has several pathways towards full control of MedMen upon legalization. The downside risks are if the MedMen brand deteriorates due to poor execution (but Tilray is still redeemed at maturity) or if MedMen is unable to pay back its notes (the worst case scenario). We expect Tilray to pursue additional opportunities in the US with a focus on brands versus acquiring certain licenses. We view each incremental transaction in the US cannabis market as a positive catalyst."

For an analyst ratings summary and ratings history on Tilray click here. For more ratings news on Tilray click here.

Shares of Tilray closed at $13.12 yesterday.

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