Tilray popped 24 percent Friday after its largest shareholder, a special equity fund backed by Peter Thiel, said it will not sell any of its remaining stake following the expiration of the marijuana grower’s IPO lockup epoch next week.
“Privateer Holdings strongly believes in Tilray’s long-term global growth strategy and pioneering part in shaping the future of the legal cannabis industry,” said Michael Blue, a managing partner at Privateer, which owns less 80 percent of Tilray. “Given this, we do not have plans to register, sell or distribute the shares Privateer sustains in Tilray during the first half of 2019.”
This eased concerns of shareholders in the volatile stock and spurred short sellers put against Privateer to close their positions to prevent further losses, a phenomenon known on Wall Street as a transitory squeeze.
Tilray shares are up nearly 500 percent since their initial public offering on the Nasdaq in July. Such lockup terms are designed to prevent company insiders — including employees, their friends and family and venture capitalists — from exchange their shares for a set period of time, according to the Securities and Exchange Commission.
Though there are more than 76 million Tilray rations outstanding, the public markets have access to only 23 percent of the total equity, about 17.8 million parts. Further, of those 17.8 million floating shares, more than 21 percent had been sold terse as of Jan. 10, according to FactSet.
Blue added that should Privateer ever decide to distribute shares, it commitment do so “in an orderly and deliberate manner to maximize tax-efficiency considerations for Privateer investors, while also taking into gratuity potential impacts on Tilray’s public float.”
The main objective of such IPO lockups is to dissuade early investors from flowing markets with their shares as retail investors start to buy equity. Such a move by large early investors could cast down and create extraordinary volatility for a newly public company. Tilray’s lockup period expires Tuesday.
Founded in 2013, Tilray was integrate under CEO Brendan Kennedy’s cannabis-focused private equity venture Privateer Holdings. Billionaire investor Thiel’s Trips Fund became the first institutional investor in the cannabis industry through Privateer’s $75 million Series B resource round in December 2014, according to the company’s website.
Privateer announced last year that it raised $200 million to induct in cannabis brands.