
Privateer Holdings Hits the Jackpot with $12B Tilray Stake - kgwgk
https://www.bloomberg.com/news/articles/2018-09-19/thiel-backed-fund-hits-jackpot-with-12-billion-tilray-stake
======
hn_throwaway_99
I know this is somewhat tangential to the story, but with now it looking like
there will be a bunch of newly-minted billionaires in the burgeoning cannabis
sector, I can't help but think of all of the (largely poor and minority)
people whose lives were ruined by marijuana charges.

It's just kind of fascinating to me how we reserve the terms "drug dealer"
mainly for (again, largely poor and minority) illegal drug sellers, but that
very word "drug dealer" conjurs up more than illegality, but a real moral
judgement that these are "bad people". But if you're rich and pulling on the
levels of power to do it "correctly", you are a forward-thinking entrepreneur.

Not really sure what my point is in posting this, but just I guess as a
reminder that how we even talk about morality is subtlely guided by the
structures of society that are not "right or wrong" in and of themselves, but
just how powerful people set things up to benefit them.

~~~
conanbatt
What is also amazing about this is that it made me hesitate strongly about
legalization of all drugs. Big ass companies selling drugs almost immediately
as the market opens up is not how I pictured "decriminalization". Should coca-
cola just sell straight up heroin? Should one of these companies produce
internal documentation about the damages of marihuana and hide it, just like
tobacco did?

I guess getting older gets you more conservative..

~~~
dgellow
How did you picture it?

~~~
conanbatt
More like "organic farming", or "small batch alcohol" for a long time. I mean
i pictured the actual criminal producers turning legit.

------
cs702
Current market cap: over $20 _billion_. Current quarterly revenues: under $10
_million_. Float: a measly 17+ million shares. Borrow rates: over 500% right
now.

    
    
      Lots of momentum × tiny float = crazy market cap + crazy borrow rates.
    

Doesn't seem... sustainable.

~~~
superfrank
It's not.

Sure, the stock crossed $200 today, but it also touched $300 midday before it
started to free fall and got halted three times in the last few hours of
trading. If you bought in at the peak today, you lost 33% of your investment
in about 2 hours.

Getting in to TLRY right now isn't investing, it's gambling. Nothing
fundamentally has changed about the business recently (AFAIK), but the stock
is up 80% just this week and 500% in the last month. Seems to me, the run up
the last few days seems pretty much driven by FOMO.

------
CompelTechnic
[https://finance.yahoo.com/quote/TLRY/options?p=TLRY](https://finance.yahoo.com/quote/TLRY/options?p=TLRY)

The stock moved up so much today that you can't see any calls that are out of
the money or puts that are in the money on the main page of options on yahoo
finance... (as of 3:16 PM ET)

~~~
tantalor
In English?

~~~
kevmo
It outperformed everyone's expectations.

~~~
fudged71
and then crashed beyond everyone's expectations

------
jiveturkey
> Citron Research said it remains short on Tilray, calling the stock’s surge
> “beyond comprehension” in a Tweet Wednesday.

and

> Tilray jumped as much 55 percent to in New York Wednesday to $240, giving it
> a value of more than $20 billion, higher than American Airlines Group Inc

Q2 revenue up just a touch from Q1, but losses have doubled. Of course this
could be growth spending.

Up 60% today, which is absurd.

~~~
zeusk
> > Tilray jumped as much 55 percent to in New York Wednesday to $240

It was at $295 prior to Liquidity halt today.

------
nlowell
I don't see any possible way for the fund to actually make use of the "value"
here. It's just a pumped stock that's had trading halted 3 times in the past
hour or so. They wouldn't be able to sell without crashing the price and I
highly highly doubt price is going to remain so high over time.

~~~
conjecTech
The borrow rates are the highest I've ever seen - 500% annualized. They'll
likely be lending a significant portion of their stake, which will net them a
good return even if they never are able to liquidate the stock themselves.

------
rdlecler1
There was a Canadian VC that was banned for life at the US boarder for
investing in a US cannabis company. Wonder if these guys will have problems.

~~~
throwaway2048
If you are an American citizen you can not be bared from re-entry, no matter
how much they might want to do so.

~~~
kurthr
Well, your US passport can be confiscated and declared invalid... then you can
be denied entry. Happened this year to people born in the Mexican border.

~~~
sjg007
Yeah this is suspect though and without due process so I bet after a few ACLU
lawsuits and a couple Federal judges intervening then this will stop.

~~~
dragonwriter
It'll probably be ordered to stop.

Whether it will _actually_ stop is...well, this administration hasn't been
known for full and immediate compliance with other federal court orders
relating to immigration and citizenship...

------
rayvy
Personally, this is starting to look like a pump scheme.

Which is weird...

Because Tilray supposedly has a decent business (just Google "seekingalpha
Tilray"). But the price action to date has been (as others have noted) nothing
short of _insane_. The CEO has been on a press tour the past few weeks which
culminated in an interview on CNBC, and he's yet to even reference the stock
price. Another commenter mentioned the craziest part, "You can't even buy
$TLRY call options that are out of the money as of today" \- meaning,
absolutely _0_ people foresaw the price action going this crazy.

Why let it get this out of hand? It's a legit business doing legit business?
Why do they need the stock price at these insane levels? The resulting burst
of this bubble is only going to hurt the retail investors, and cannabis stocks
in general (at least short term). Obviously my first answer is the ol' Jordan
Belfort _pump and dump_ , but outside of just pure greed, it seems Tilray
hardly needs this to happen.

I also learned via Bloomberg that the Tilray CEO, is a leading partner in the
(private equity) firm that owns 75 million shares of unlisted Tilray stock.
Which makes me wonder if he's working for Tilray, or for private equity
(still).

Something is just very, very fishy about this to me.

~~~
sokoloff
> "You can't even buy $TLRY call options that are in the money as of today"

Exactly backwards: _All_ of the call options on $TLRY are in the money.

~~~
vsah
Still incorrect actually. There have been out of the money call options on
TLRY all day.[0]

OP got mixed up because someone posted about how Yahoo finance only had in the
money calls, but that was Yahoo's fault alone.

[0] [https://www.nasdaq.com/symbol/tlry/option-
chain?callput=call...](https://www.nasdaq.com/symbol/tlry/option-
chain?callput=call&money=out)

~~~
rayvy
I get what you mean, but it depends on when/where you looked for the options.
Basically saying at some point in the day, there were no OOM call options -
which still...makes the point.

------
stephengillie
> _“Our long-term vision is if a patient walks into any pharmacy in any
> country in the world that has legalized cannabis that patient should be able
> to obtain a Tilray product. That’s our global goal,” Kennedy said in an
> interview this week from New York._

Hopefully this doesn't signal the beginning of cannabis consolation. It's
possible that the market will follow the model of the beer market, where a few
large companies have bought out numerous microbrewers.

~~~
jeffreyrogers
Anecdotally microbrewers seem to be doing fine. The city I moved from (pop.
~200,000) had ~10 microbrewers. The city I currently live in (few hundred
thousand people as well) also has several.

If small companies can't compete it'll be because they can't deal with the
regulation or the business gets commodified and they can't compete on price
since they don't have economies of scale, but the later doesn't seem likely to
me.

~~~
nightski
As someone who really enjoys beer, isn't part of the reason for that because
of the incredible variety of styles and flavors that can be achieved with
beer? It's such a versatile medium with a large range of quality differences.

But as someone also who has never smoked pot or been that interested in it -
is it anything like that at all? Or is the experience pretty generic (other
than the obvious quality differences)?

~~~
code_duck
It’s a botanical product that has a range of tastes and flavors that span
almost the entire range of culinary herbs, in a somewhat unexpected way.
Quality of end product is very dependent upon quality of cultivation and
genetics, and that’s why in Denver, prices range from $4 to $25 a gram. Same
for concentrates - the flavor and effect of the water hash and live rosin is
far more delicate (for $90 a gram) compared to the base waxes and shatter that
costs dramatically less, about $15 a gram.

It’s like the difference between Highland Park, Dewars and $10 crap scotch but
also the difference between Kahlua, Tanqueray and Limoncello - and also the
quality and brand variances within a style. The dozens of varieties of herb
and extract you see at the store do all separately exist for good reasons. The
expensive extracts are clearly a more delicate product than the cheap ones,
and among a certain brand there maybe be several very distinct (natural,
botanical) flavors available.

I tend to keep a variety on hand - a lemony sativa extract like Super Lemon
Haze or Jack Herer, a skunky/gassy hybrid like Sour Diesel, a bright Sativa
like Columbian or Panamanian, and a heavy indica like Grape Skunk or whatever
smells good (strain names can be standard or per-store) in addition to
something with CBD and maybe CBN (medicinal cannabinoids). Selection for me is
very flavor dependent, but also for the effects, which vary widely within a
range and are harder to predict by aroma and appearance.

------
antoniuschan99
The news about Tilray today made me think about XRP or Ripple last year when
it spiked to $4

~~~
noddy1
Yup, which was the perfect time to dump all your crypto bags.

------
sjg007
I am actually surprised the Feds allow the stock to be traded on a US
exchange. I would think that there may be some regulations on the money raised
(e.g. during an IPO) and transferred out of the country based on their
industry.

------
anonymous5133
The price will crash even if he sells a tiny amount of it.

------
megadethz
How much can he get out from this? any way to hedge his exposure to this until
lockup expires?

~~~
winslow
Could do similar things to what Mark Cuban did to hedge his exposure of Yahoo
stock after the purchase of his company. Basically shorting against your
holding [1].

[1] [https://www.quora.com/How-did-Mark-Cuban-save-his-wealth-
fro...](https://www.quora.com/How-did-Mark-Cuban-save-his-wealth-from-the-dot-
com-crash-He-sold-Broadcast-com-for-5-7-billion-in-Yahoo-stock-How-did-he-get-
out-before-it-all-went-down)

~~~
LanceH
It's not shorting if you're holding, it's just and option.

~~~
nostromo
People use “short” as a synonym for holding a put option _all the time_.

------
travisoneill1
He better sell it quick!

------
noobermin
I guess the "Thiel-backed" bit in the title worked as clickbait. It's not like
Thiel had foresight, the Privateer people did.

Or to extend it further, it's not like Privateer had amazing foresight either.

------
mankash666
Someone please explain this: Revenues in 2017: ~$21M, loss: $7.5M

But, market cap: $27B

Why?

~~~
travisoneill1
A stock goes up when someone buys it and down when someone sells it.
Valuations based on financial numbers work only if decisions to buy or sell
are also based on that framework. In this case people are buying based on the
felling that this is "the next big thing" without looking at the numbers. So,
since people keep buying, the stock keeps going up. They will get slaughtered,
but it will take time.

~~~
blibble
> A stock goes up when someone buys it and down when someone sells it.

this isn't true: to buy a share someone else has to sell it (with some
exceptions)

in reality the price depends on what the buyer and seller agree
(electronically or otherwise) -- just like everything else you buy

in general if demand is higher than supply the price rises, just like other
markets

~~~
travisoneill1
Right. Just easier to say buying a stock drives it up than buying a stock at
the offer price removes liquidity at the lowest current offer price.

------
cuboidGoat
So, is Thiel going to be in trouble for this or is that threat only for small
investors?

[http://fortune.com/2018/09/14/canada-cannabis-ban-us-
border/](http://fortune.com/2018/09/14/canada-cannabis-ban-us-border/)

