Read the Beforeitsnews.com story here. Advertise at Before It's News here.
Profile image
By Midas Letter (Reporter)
Contributor profile | More stories
Story Views
Now:
Last hour:
Last 24 hours:
Total:

VIDEO: Tilray Inc (NASDAQ:TLRY) First NASDAQ Cannabis IPO

% of readers think this story is Fact. Add your two cents.


Tilray Inc (NASDAQ:TLRY) (FRA:2HQ) CEO Brendan Kennedy discusses Tilray’s path toward becoming the first cannabis company to IPO on the US Exchange. Kennedy outlines Tilray’s current global footprint, highlighting the company’s expected growth on the cultivation side from 8 to 90 metric tons by the end of the year. The key to Tilray’s international growth is its facility in Portugal, which allows for both indoor and outdoor growing, and tariff-free access to European Union markets. Kennedy explains that the rapid increase in countries legalizing medical cannabis combined with Canada’s leading role in shifting recreational cannabis laws will result in changes to US law in the next 3 to 4 years.

https://youtu.be/pUbCkD6Ny1w

Transcript:

James West:  Hey! Welcome back to Midas Letter Live. My guest this segment is Brendan Kennedy, CEO of Tilray. In trading on NASDAQ under the symbol TLRY. Brandon thank you for joining me again.

Brendan Kennedy: Thank you for having me.

James West: So, amazing transformation from private company to high-flying NASDAQ large-cap. It’s kind of like you snuck up behind us and surprised everybody. So, tell me about the thought process behind that whole sort of trajectory.

Brendan Kennedy: Sure. So, something we’ve been working on for about a year and a half and started down this road about a year ago meeting with investors in Canada and US; about 30 meetings, 15 in the US and 15 in Canada. One of the points of feedback from US investors, so think Blue Chip, long-only mutual funds was that: wow a TSX would be interesting. They really wanted someone to be the first cannabis company to IPO on the US exchange. They wanted someone regulated by the SEC. They wanted someone who would report in US gap as opposed to IFRS with all of the biological asset malarkey.

So, we took that feedback a year ago and started down a very specific path towards a NASDAQ IPO. We kept pretty quiet

James West: Extremely quiet!

Brendan Kennedy: Until about two weeks before hand when we had to publicly disclose.

James West: Right, so congratulations.

Brendan Kennedy: Thank you.

James West: The burden of compliance with getting an IPO onto NASDAQ as a cannabis company must boggle the mind. I can only imagine.

Brendan Kennedy: You should see our legal bills for a NASDAQ and SEC attorneys in order to get us through this process.

James West: Right.

Brendan Kennedy: Even thirty days beforehand a lot of people told us it was impossible. NASDAQ and SEC would never allow that. But we were confident of the right path.

James West:  Sure to what extent pedigree associated with Privateer Holdings and the people involved the Privateer contribute to the fact that you were able to sort of pierce that veil as a seminal event for cannabis companies in U.S?

Brendan Kennedy: It really helped us. It helped us both in terms of our internal legal counsel and the legal counsel we were able to obtain from outside firms. It also helped with the pedigree of the investors in Privateer and the investors in the Tilray round we did in in January. We did a round in January that was 10 investors; 9 from the US 1 from Canada, 8 of whom had never invested in cannabis before and that helped us get through the process. I think if people were to see the orders that came in for the IPO, a lot of the names on the list would surprise you, they’re global blue-chip firms that never invested in this industry before.

James West:  Really? So, this is the onset of the migration of the largest capital pools of the world finally getting in the space, I guess.

Brendan Kennedy: Definitely. people don’t really know about in terms of who participated in the IPO.  People will find out when it’s disclosed I guess around November and that’ll be certainly an interesting read.

James West:  Right. I’ll have to put on my 8k monitors there. Okay, you made an interesting comment about the difference between IFRS and gap treatment of biological assets. Is it within your realm of expertise to have a conversation about what that is on granular basis?

Brendan Kennedy: Sure. If you want. So, you’re familiar with how IFRS tracks it. Essentially revenue is being booked while a crop is being grown and that works for certain products. It would work for chickens or pork or wheat, malt, barley, things like that. There’s a lot more variability in terms of cannabis. So, you get this weird situation where companies have gross profit higher than gross revenue.

James West:  Negative cost per sale.

Brendan Kennedy: That’s right. It doesn’t make any sense.

James West: That’s amazing.

Brendan Kennedy:  So, you just don’t see that. There’s no accounting for biological assets in US gap. Revenue is revenue.

James West: So, biological asset can be referred to in inventory but can’t be added as input on the balance sheet.

Brendan Kennedy: That’s exactly right.

James West: Okay well that’s comforting to me. I know it’s comforting to Al Rosen who’s a forensic accountant we have on the show a lot because he calls the Canadian big ACMPR growers accounting standards, he calls them ” financial statements of mass delusion”.

Brendan Kennedy: That was certainly what our investors, New York, Boston, mutual funds, they didn’t want that. They wanted U.S GAP because it’s something they understand.

James West: I don’t want IFRS treatment because I seriously evaluating a company’s balance sheet and financials you have to go through and say okay, get this negative cost of sales malarkey out of there and now we generate a real balance sheet. You know, it’s astounding to me that practice is permitted. But, let’s move on we’ve said our piece on that.

Tell me about Tilray’s sort of global footprint right now in terms of operations and growth initiatives.

Brendan Kennedy: Sure. So, let’s see on the cultivation side, capacity side we’ve started the year with the capacity of about 8 metric tons. We’ll end the year at around a rate capacity of about 90 metric tons, 90 million grams so an 11 times increase in capacity. We have our existing facility in Nanaimo, British Columbia. We have a hundred acre piece of property in Southern Ontario, in the township of Inniskilin. There’s a 13 acre greenhouse on it, fully operational and then in Portugal we have a facility where we grow indoor and outdoor today. I think as far as I know we’re the only LP that currently grows outdoors somewhere in the world and we’re building a state-of-the-art Dutch glass house there as well.

Portugal will really be our hub and our production facility for all of our exports to the EU. Really it’s ideal climate, low cost labor, tariff-free access to the EU and so will supply all the products for the EU from the EU going forward. Currently Tilray products are available in I think 11 countries on five continents and we continue to add new countries on a regular basis. Today we export everything from Canada but we’ll start dividing that up between Canada and Portugal very soon.

James West: Interesting. So, then I’m going to suggest being a private company for the bulk of your existence up until now has not been an impediment to accessing capital or projecting your Tilray sort of strategy across the world.

Brendan Kennedy: Definitely not. In some ways it was an advantage because we were really managing to long-term growth and our investors really take a long view of the industry. I’ve been doing this for 8 years. I started in May 2010 in the cannabis industry. I tell our employees everyday this is day one in the industry and being private certainly was hugely advantageous to us over the last 5 years and Tilray, our investors certainly benefited from waiting as long as we did because it really helped with that IPO market cap that was really different from anything we’ve seen anywhere else in the industry.

We were at a disadvantage over the last year to 2 years really on two points. One is while we were able to raise significant capital from private investors or investors willing to invest in private companies, it just takes more time than accessing capital through public market. So that was one disadvantage. We’re able to raise capital much more quickly now.

James West: Sure.

Brendan Kennedy: And then we didn’t have a public company stock as currency and so we haven’t been able to conduct M&A transactions with ease like many of our competitors and we will conduct you know I imagine we’ll conduct a few M&A transactions over the coming months but they’ll also be really different from what I’ve seen out there. We’re not out looking for a billion dollar acquisition. That’s just not in our DNA.

James West: Sure. The federal prohibition on cannabis in the United States is probably responsible for your choice to grow and ship cannabis from Canada but it’s somewhat counterintuitive and surprising that NASDAQ would allow a cannabis company on to the premier exchange of the United States in many respects even while Federal prohibition existed. So, is there some kind of tacit sort of understanding between your legal team and the federal government that makes this possible?  Or is it even necessary given the incremental pro-cannabis movement that’s being made towards federal de-prohibition?

Brendan Kennedy: No, so what it really means is everything that we do everywhere in the world is legal in the country in which we operate. So we fully comply with Canadian laws, Portuguese laws, German laws, Australian laws. We have 370 employees in seven countries and everything we do, everywhere we operate is fully legal and so that is what has allowed us to list in the US. If you think about, a good example would be a company like Sanofi grows poppies in Spain. It would be very illegal if they were to grow poppies in the US to produce opioid alkaloids for pharmaceuticals. That’s probably the closest analog. Everything we do complies with the laws and regulations in all the countries in which we operate and so that’s how the US government looks at how we operate and why the SEC allowed us to list in the US.

James West: I see. Interesting. So, from your sort of internal view point if it’s not too much of an invasion of privacy, what do you see happening in terms when does de-prohibition at the federal level happen especially in view of the fact that the FDA is now in conflict with the DEA as a result of the licensing of an FDA drug by GW Pharma?

Brendan Kennedy: Yes. So, I’ll speak about a couple different opportunities right that I see taking place. When I started 8 years ago there were 15 countries in the world that had legalized medical cannabis. Today there’s over 35 and the pace of change is so fast right? In the last 8 weeks the UK went from not even talking about it. I would have predicted the UK would be the last country in the world to legalize medical cannabis. It went from not talking about it 8 weeks ago to legalizing over an 8 week period. It’s just astounding the change. I see how we get from 35 countries to 40 to 50 to 60 in a pretty short amount of time; a year to 3 years you’re going to see just more and more countries legal medical cannabis.

That’s a huge opportunity. Obviously, we’re going to go from one country in the world, Uruguay, that’s legalized cannabis for adult use to 2. So, 100% or 1000% growth if you think about 3.5 million people in Uruguay and 35 million in Canada. I predict you’ll see what I call country number 3 within 12 months of October. That country will base its regulations on Canada’s adult use regulations. You’ll see country 3, country 4 and country 5 in terms of adult use. So those are the two global dynamics that are taking place and at some point I think within the next 3 or 4 years you’ll see the US change its laws and I think it’ll end up being something like the state’s rights law.

If you look at Congress or the majority of Congress in the US now comes from a district that has legalized some form of cannabis.

James West: Right. Okay and finally let’s talk a bit about the valuation of Tilray and how do you back fill this valuation in the next 6, 12, 24 months so that it is less speculative and more on the balance sheet or am I misunderstanding the valuation?

Brendan Kennedy: So, for us there’s been a lot of metrics that have been used over the last 5 years in this industry to justify really these public company valuations. We’ve certainly benefited from being able to point to them as comparable over the last 5 years. If you look back it used to be about the number of patients or vault capacity was a particularly odd valuation metric and then funded capacity.

At some point I would say after October 17th we’re actually going to point to two real metrics; revenue and profit. That’ll be a relief to shed all those other metrics and so when I think about the next 2, 3 and 4 years for Tilray it’ll be about increasing revenue, revenue from global medical cannabis and obviously revenue from adult use cannabis here in Canada and other countries that made it legal.

We need to continue to build out our capacity and build out brands and products that Canadian consumers love.

James West: Okay, well that’s a great update. Congratulations on the go public strategy and thank you for coming in and filling us in.

Brendan Kennedy: Thank you so much for having me.

More Great Cannabis Content:

Original article: VIDEO: Tilray Inc (NASDAQ:TLRY) First NASDAQ Cannabis IPO

©2018 Midas Letter. All Rights Reserved.


Source: https://midasletter.com/2018/08/video-tilray-inc-nasdaqtlry-first-nasdaq-cannabis-ipo/


Before It’s News® is a community of individuals who report on what’s going on around them, from all around the world.

Anyone can join.
Anyone can contribute.
Anyone can become informed about their world.

"United We Stand" Click Here To Create Your Personal Citizen Journalist Account Today, Be Sure To Invite Your Friends.

Please Help Support BeforeitsNews by trying our Natural Health Products below!


Order by Phone at 888-809-8385 or online at https://mitocopper.com M - F 9am to 5pm EST

Order by Phone at 866-388-7003 or online at https://www.herbanomic.com M - F 9am to 5pm EST

Order by Phone at 866-388-7003 or online at https://www.herbanomics.com M - F 9am to 5pm EST


Humic & Fulvic Trace Minerals Complex - Nature's most important supplement! Vivid Dreams again!

HNEX HydroNano EXtracellular Water - Improve immune system health and reduce inflammation.

Ultimate Clinical Potency Curcumin - Natural pain relief, reduce inflammation and so much more.

MitoCopper - Bioavailable Copper destroys pathogens and gives you more energy. (See Blood Video)

Oxy Powder - Natural Colon Cleanser!  Cleans out toxic buildup with oxygen!

Nascent Iodine - Promotes detoxification, mental focus and thyroid health.

Smart Meter Cover -  Reduces Smart Meter radiation by 96%! (See Video).

Report abuse

    Comments

    Your Comments
    Question   Razz  Sad   Evil  Exclaim  Smile  Redface  Biggrin  Surprised  Eek   Confused   Cool  LOL   Mad   Twisted  Rolleyes   Wink  Idea  Arrow  Neutral  Cry   Mr. Green

    MOST RECENT
    Load more ...

    SignUp

    Login

    Newsletter

    Email this story
    Email this story

    If you really want to ban this commenter, please write down the reason:

    If you really want to disable all recommended stories, click on OK button. After that, you will be redirect to your options page.