Is Tilray's (TLRY) weed wheeling and dealing news Thursday taking shares too high?
The Canadian cannabis stock was soaring on Thursday amid the news of its partnership with Anheuser Busch InBev (BUD) . The deal, which inks one of the highest profile cannabis names to perhaps the highest profile name in alcoholic beverages, is proving a big boost, buoying the stock to about a 10% gain in morning trading.
"What this tells you is how big the market is," Jim Cramer pointed out from the floor of the NYSE this morning.
Yet, the buy-in from other companies into the space has been far larger.
That could be obscuring the actual details of the deal that pale in comparison to that of some of its peers and might make the day's bounce outsized.
Cronos Comparison
Top of mind for many cannabis investors is the recent blockbuster agreement between Tilray competitor Cronos (CRON) with cigarette conglomerate Altria (MO) .
The first major difference is between Tilray and Cronos is that Altria, the maker of Marlboro cigarettes, actually purchased an equity stake.
The 45% stake in Cronos valued at $1.8 billion, which includes $1.05 billion option to purchase an additional 10% in the future, nearly doubles the valuation of Cronos and gives the company a big base to attack the Canadian market as it matures and possibly the increasingly more open American market.
"The partnership does not appear to provide a route to control of Tilray," Jefferies analyst Edward Mundy clarified. "It offers a lower risk approach given reputational considerations for ABI as a global brewer."
At the very least, it represents far less of a buy in from BUD than Altria was willing to inhale.
Additionally, Tilray's partnership by comparison is more of an exploratory effort that offers nothing in terms of valuation speculation, despite its over $500 million boost to Tilray's market cap.
Given that the infusion to the Tilray joint venture only stands at $50 million, such a boost appears a bit overdone. Given Cronos jumped by about twice as much on a direct infusion of 36 times more capital the volatility of Tilray comes further into focus.
Additionally, the company remains well below its historic highs. In fact, it remains at nearly one quarter of its peak levels.
So, while the buy-in from a historic brewery is a major benefit to the industry, maybe the market is overplaying the impact on Tilray specifically.
