This Canadian Cannabis Producer Has Found a Partner for Its Expansion Into the U.S. Pot Market

The U.S. marijuana market remains illegal and off-limits to Canadian cannabis producers. Although states continue to pass legislation related to marijuana use, federally, nothing has changed. There is hope…

that there could be some reform coming soon, especially now that Democrats control both the House and Senate, but outright legalization is by no means a guarantee. President Biden hasn’t suggested that legalization is a pressing item on his agenda.

However, that hasn’t stopped Canadian-based cannabis companies from preparing for themselves for the moment the market opens up. Canopy Growth has had a deal in place with Acreage Holdings since 2019 — although the companies can’t complete it given the federal ban on pot. Tilray (NASDAQ:TLRY) made headlines last week when it announced that it had also found a partner south of the border: MedMen (OTC:MMNFF).

Tilray acquires convertible notes of the multistate operator

Unlike the Canopy Growth’s deal involving Acreage, which is tentative and for 100%, Tilray has acquired the majority of MedMen’s senior secured convertible notes. Once the path is clear (e.g. legalization takes place) for Tilray to convert the notes and exercise the related warrants, the Canadian company will hold a 21% stake in the multistate operator. And if legalization takes place, that could just be the start. Tilray CEO Irwin Simon told BNN Bloomberg that his company could end up acquiring the rest of MedMen — once it is legal to do so.

Is this a good move for Tilray?

MedMen has 25 retail locations in the U.S., in hot markets like Los Angeles and Las Vegas, which could provide Tilray with some exciting opportunities to tap into in the future. It is a bit of an interesting move for the company, however, given that MedMen has been burning through cash and incurring losses quarter after quarter. Over the past 12 months, its losses have totaled $242 million and its cash burn from operations was $61 million.

Tilray, meanwhile, reported a profit in its latest quarterly earnings for the period ending May 31 — which was the first to include results from both Tilray and Aphria since the completion of their business combination earlier this year. It was also the ninth consecutive period in which the company reported a positive earnings before interest, taxes, depreciation, and amortization (EBITDA). MedMen has incurred an adjusted EBITDA loss totaling $34 million over the past nine months.

Overall, I would hesitate to call this a…

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