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Tilray (TLRY.TO)(TLRY) shares climbed as much as 26 per cent in early trading on Wednesday, after the pot producer booked a profit in its first quarter since finalizing a reverse-merger with Aphria.
While Tilray's fourth-quarter results capture only a one-month financial snapshot of the combined company, chief executive officer Irwin Simon says he is confident the "new Tilray" is on a path to becoming a US$4 billion company by the end of 2024. Speaking on a post-earnings conference call with analysts, he predicts acquisitions in the United States will be key to hitting that goal.
"In the U.S., there are two paths I'm going down. Number one is looking in the consumer products area, in alcohol and food that today are sold in the marketplace that [can] ultimately be converted to THC or CBD products once legalization does happen," he said on Wednesday.
"Alongside that would be looking at optionality, investments in MSOs (multi-state operators) that would strategically align with Tilray."
Simon has experience in the natural foods business, having spent decades building Hain Celestial into a multi-billion dollar consumer packaged goods company. Last November, while CEO of Aphria, he oversaw the acquisition of craft beer-maker SweetWater Brewing. The company has used SweetWater to introduce U.S. consumers to its pot brands through cross-branded beers. Aphria also has a footprint in hemp-based foods through its Manitoba Harvest products, which the company says are available in 17,000 North American grocery stores.
BMO Capital Markets analyst Tamy Chen questioned what she called a "very complex" acquisition plan spanning alcohol, food, THC and CBD cannabis. She asked Simon why a U.S. cannabis operator would consider an investment or possible acquisition by Tilray, given recent legislative progress towards federal legalization in that country.
"I'm not sure why they wouldn't want to partner with us," Simon said, touting Tilray's leading position in the Canadian market, European medical business, and US$488.5 billion in cash and equivalents. "Taking a lot of those learnings from Canada and Europe into the U.S. will be very helpful for any MSO that partners with us."
Tilray shareholders have until July 29 to vote on a proposal from management that includes authorization to increase the pool of common stock. The company says the move will allow it to "move quickly to accelerate growth through potential acquisition and financing opportunities." Proxy advisory firms ISS and Glass Lewis have backed the proposals.
Toronto-listed Tilray shares were up 23.21 per cent to $19.75 at 11:33 a.m. ET.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.