Shares of marijuana IPO Tilray (TLRY) and other marijuana stocks continued their wild action rise Wednesday after the Canadian pot producer's CEO envisioned a massive industry that would send tremors through the alcohol and pharmaceutical landscapes. Tilray stock shot up as much as 94% intraday to 300, gave up all of those gains, then closed with big gains. Shares, down sharply in initial after-hours trading, were halted five times during the regular session.
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Tilray CEO Brendan Kennedy told CNBC's Jim Cramer late Tuesday that the medical cannabis market could reach around $100 billion globally in a matter of years. He also said pharmaceutical and alcohol companies — which are increasingly weighing pot's recreational and medical potential — should join forces with cannabis rather than try to fight it. Earlier Tuesday, Tilray said it received approval to send a medical cannabis product to the U.S. for a clinical trial.
"If you look at large pharmaceutical companies, they have to hedge this," he said. "Cannabis is a substitute for prescription painkillers, prescription opioids, and so if you're an investor in a pharmaceutical company, or you're a pharmaceutical company, you have to hedge the offset from cannabis substitution."
As for alcohol, he said that "all" alcohol companies need to enter the marijuana industry. "I think its a great hedge for them, whether you're an alcohol company or an investor in an alcohol company."
Tilray already has a partnership with a division of Novartis (NVS), and received U.S. regulatory approval Tuesday to import a medical cannabis product.
At the same time, as more alcohol-industry veterans defect to the cannabis industry, he indicated that Tilray would rather fly solo than strike a partnership.
"Our intent is to build a company that dominates part of this $150 billion dollar industry. I think you'll see multiple $100 billion companies. We don't want to partner with ABI," he said, referring to Anheuser-Busch InBev (BUD). "We want to build ABI."
AB InBev, when reached last week, said in an email that it was "closely following the legalization trends in the cannabis industry."
"There are still many unknowns regarding the long-term commercial and societal impacts of marijuana legalization," the company continued. "It is our hope that the public health community and policymakers are examining this issue carefully so that marijuana is regulated appropriately where it's legal."
Marijuana Stocks Whipsaw Again
Tilray stock vaulted as high as 300 intraday but then plunged to turn slightly negative briefly. Shares ramped up again, rising 38% to close at 214.06 in the stock market today. Tilray stock was halted five times for volatility during the session. Tilray was off sharply in early after-hours action, trading around 175.
Among other marijuana stocks, Cronos Group (CGC) rose 9.8%, but was well off highs. Canopy Growth (CGC) reversed to trade down 5%.
Tilray's value, since it became in July the first pure-play marijuana IPO to hit a major U.S. exchange, has soared since its IPO priced at 17. That increase comes as concerns grow about whether an industry where the biggest market — the U.S. — still outlaws marijuana can live up to the valuations.
Short-seller Citron Research said in a tweet Wednesday that Tilray's soaring gains were "beyond comprehension." The firm said it had a short position in the stock and "will hold a manageable position until rationality sets in."
Citron last month briefly sank Cronos after publishing a report saying the company was "all talk." However, some analysts pushed back against that report's allegations.
Tilray Eyes New Capital
Tilray's gains, which also follow its advances in the U.K. and in Germany, have ballooned its market value to more than $17 billion.
During the CNBC interview, Cramer noted that Tilray has far less cash than Canopy Growth, which last month landed a massive investment deal with Constellation Brands (STZ). Cramer asked Kennedy if now was the time to raise more capital, given the newfound attention from investors. Kennedy said Tilray was "constantly evaluating" new sources of capital.
Along with a bubble in marijuana stocks, observers have worried about a collapse in weed prices as more rivals begin producing it. Kennedy, during the interview, downplayed those concerns.
"It's like valuing ABI on the price of wheat," he said.
"You're not going to see the commoditization of the finished product," he continued. "And in the brands, you'll see price segmentation, value brands, premium brands. But you won't see commoditization of the brands across the spectrum."
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