It’s been a volatile couple of years for shares of Tilray (TLRY). The stock reached $300 in 2018 and last month, it hit $15, a new all-time low. And though the stock has since stabilized, and is currently trading at about $19 per share, I am concerned that we haven’t seen the bottom yet…
In September 2019, TLRY tapped the equity market for $400 million of new funding, which caused significant dilution. As the share count increases, shareholders continue to become more skeptical.
The chart below shows that the short interest in shares of TLRY has increased to an all-time high as of January.
Now there are over 10 million shares short. Over the past 12 months, this has equated to a 165% increase in short interest.
Despite the skyrocketing short interest in the stock, we are also concerned with the amount of cash TLRY is burning through. In the most recent 10-Q filing, TLRY went through $167 million in cash from operations during the first three quarters of 2019. This is an increase of over $100 million, up from $26 million just a year earlier. Capital expenditures were $50 million up from $12 million during the first three quarters of 2018. They also have almost $214 million spent on acquisitions and other ventures.
TLRY used almost half a billion dollars in roughly 9 months. We don’t expect the companies spending habits to continue like this (they can’t afford it) but even if they burn thought between $50-60 million per quarter, that still equates to well over $200 million for this year.
The company ended Q3 2019 with $122 million in cash and investments. If they needed to raise an additional $200 million for this year that would mean an additional 10 million shares would need to be sold resulting in harsh dilution.
On top of all these 2 major red flags, in a…
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