In what might be the most impactful cannabis-market news of the past year, Canadian company Tilray (NASDAQ:TLRY) famously bought out Aphria. This created the world’s biggest cannabis company by revenue. With that, you’d think that TLRY stock would be flying high now, right?
In actuality, the share price has consistently declined since February. By mid-September, investors could have purchased Tilray shares for $12.
TLRY stock hasn’t traded at that price since early January. So, is this an irresistible bargain, or a falling knife that should be avoided?
There’s an interesting risk-to-reward scenario here. One particular development seems to have investors in a state of panic – but maybe there’s a positive angle as well, which could make Tilray a cannabis-market darling again.
A Closer Look at TLRY Stock
The Tilray-Aphria merger was announced late last year, and that seems to have led to a wild rally in TLRY stock.
I’m talking about a vertical move here, culminating in a 52-week high of $67 on Feb. 10, 2021.
Interestingly, this occurred while the Reddit-fueled short-squeeze phenomenon was in full effect.
Between the acquisition news and the meme-stock mania, there was no stopping TLRY stock in 2021 – or so it seemed.
After the pop came a tremendous and prolonged drop. Painfully, Tilray’s investors witnessed the share price fall to $20 in April and $15 in July.
If TLRY stock is still close to $12 when you’re reading this, you have a number of options.
Sure, you can freak out and panic-sell your shares, or avoid the stock altogether if you’re not invested.
On the other end of the extremist spectrum, you could load the boat on TLRY shares and hope for a return to $67.
My favorite strategy, however, would be to take a moderate position and consider averaging down gradually if the share price falls to $10 and $8.
So, here’s the big news development that seems to have the bears and skeptics all worked up.
Not long ago, Tilray held a special shareholders’ meeting. In it, there was a vote on a proposal allowing the company to issue more shares.
That proposal passed by a slim margin. Not everybody was pleased with this outcome.
Tilary seemed pretty stoked about it, though. The company tweeted, “Thank you Tilray Shareholders!”
Chairman and CEO Irwin D. Simon seemed quite pleased, as well. Tilray’s press release about the matter didn’t specify the number of new shares to be issued. Simon did hint at the benefits of this outcome, though.
“Due to the support of our stockholders, Tilray now has the resources we need to build on our momentum and execute on our plans,” Simon said.
A Growth Plan, by the Numbers
The CEO’s statement was somewhat vague, I’ll admit.
Moreover, it’s understandable if Tilray’s investors don’t favor the issuance of more stock shares, due to concerns about dilution.
Thankfully, however, the company offered up a more detailed plan regarding what Tilray intends to do with the proceeds from the share issuance.
Overall, the company will “accelerate its progress towards its goal of delivering $4 billion in revenue by the end of fiscal 2024.”
More specifically, Tilray will expand its presence in the European Union, with the objective of generating $1 billion in revenue from the region.
Plus, in its home country of Canada, Tilray intends to increase its retail market share from 16% to 30% by the end of fiscal 2024.
And here’s where the rubber really meets the road. Tilray plans to “actively pursue accretive and strategic acquisition opportunities in the U.S., Canada, and globally.”
The Bottom Line
Which canna-businesses will Tilray acquire in the coming months and years?
That’s the thought which should be on TLRY stock holders’ minds, rather than worries about share-price dilution.
Given the stock’s already ultra-low price – especially if it’s still near $12 – it’s time to consider the potential upside, rather than obsess over the downside.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.