How high can the world’s most-valuable cannabis company go?

The plant with potential.
The plant with potential.
Image: Public domain
We may earn a commission from links on this page.

Higher than a bird? Higher than a plane? Higher than Snoop Dogg in a hot-air balloon?

Since becoming the world’s most valuable medicinal cannabis company yesterday (Sept. 18), Canada’s Tilray Inc. is on the up. And up, and up.

In barely three months since it went public, its share price has risen almost eight-fold. It rose another 50% overnight, from $154.98 and has reached over $269.50 today. As its CEO eyes a $100-billion future, where’s the limit?

Dan McCrum, writing in the Financial Times (paywall), thinks a crash is inevitable. The stock is “wildly overhyped,” he said: “Any attempt to sell all the shares, or even to dump large amounts of them, we suspect, would cause the valuation to collapse.”

Others say that Tilray’s high price might be the product of a certain amount of novelty. “One of the big drivers behind the run in that name is perhaps a bit of scarcity appeal,” analyst Russell Stanley told Financial Post, “in that it’s one of a small number of cannabis companies listed on a major US exchange.”

CNBC’s Jim Cramer, who hosts Mad Money, cautioned investors in an interview with Tilray CEO Brendan Kennedy that the company needed more money if it was to achieve its lofty goals: “Whether it’s a partnership or whether it’s [an] equity offering, it certainly wouldn’t be a bad idea. It’s an expensive proposition to be as big of a consumer products company as you’d like to be.” (Cramer himself favors the second most valuable cannabis company, Canopy, ”because of Constellation’s involvement.”)

Canadian cannabis companies in general are blazing: Shares in Aurora Cannabis surged this week amid reports of a possible collaboration between Coca-Cola and Aurora to produce cannabis-infused beverages. (Aurora’s denial of those reports has done little to dampen its rising share price.) Tilray’s latest rise comes after the US Drug Enforcement Administration approved its request to export medical marijuana yesterday.

Even the most soaring of these stocks may take a hit when Canada’s legalization of recreational cannabis comes into effect in mid-October. Without a proper understanding of what the market will look like, The Motley Fool’s Sean William warned back in July, “marijuana stocks are probably going to fall victim to a long-perpetuated trend in the stock market of overestimating the impact and/or profitability of a high-growth or game-changing new technology or product.” In other words, it may all go up in smoke.