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Tilray targets a foothold in U.S. cannabis market

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Tilray targets a foothold in U.S. cannabis market with MedMen transaction: BofA

Aug. 18, 2021 8:40 AM ET
By: Dulan Lokuwithana, SA News Editor

Tilray (NASDAQ:TLRY) has climbed ~7.4% in the pre-market after the company announced the purchase of the majority of outstanding convertible notes of MedMen Enterprises (OTCQB:MMNFF) as the Canadian cannabis player eyes the U.S. market in the event of federal legalization.

Commenting on the transaction, Bank of America sees the investment as a positive for Tilray, giving the company a foothold in the U.S. market with potential distribution opportunities with MedMen in Canada and Europe.

The analyst Heather Balsky expects the company to chase further prospects in the U.S., targeting brands over licenses. “We view each incremental transaction in the US cannabis market as a positive catalyst,” Balsky wrote, maintaining the buy rating on the stock.

The analyst thinks that Tilray's (TLRY) valuation has not fully captured the future upside from its merger with Aphria and the prospects of positive free cash flows in the near term. The per-share target of $21.50 implies a premium of ~63.9% to the last close.

The upcoming vote scheduled by Tilray (TLRY) board for shareholder approval to increase outstanding shares is “important,” the analyst argued, noting that it would enable the company to improve liquidity for U.S. market entry. “In our view, there is downside risk to the stock price if it’s unable to eventually pass,” Balsky wrote on the proxy vote.

In the pre-market, Canadian cannabis players such as Cronos Group (NASDAQ:CRON) and Aurora Cannabis (NASDAQ:ACB) are trading higher with gains of ~1.3% each. Canopy Growth (NASDAQ:CGC) has added ~1.8%.


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