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Roth analyst can't pin down a price target after Tilray announces downstream merger

On Monday, analyst Scott Fortune maintained his Neutral rating for the company, but declined to offer a price target thanks to 'unprecedented volatility'
Cannabis and money
Tilray is a British Columbia-based cannabis producer and distributor

After Tilray Inc (NASDAQ:TLRY) announced plans to acquire its largest shareholder in a downstream merger, analysts at Roth weren’t quite sure exactly how to feel about the cannabis producer.

On Monday, analyst Scott Fortune maintained his Neutral rating for the company, but declined to offer a price target thanks to “unprecedented volatility” following Tilray’s agreement with Privateer Holdings to sell its 77% stake over two years.

Its shares trickled lower Wednesday to $39.76.

The agreement will allow Tilray to acquire Peter Thiel-founded Privateer in what's known as a downstream merger. Privateer’s 75 million shares will be subject to a lock-up, meaning Tilray would have discretion over any sales of stock for the first year.

READ: Tilray's stock pops on deal to acquire Peter Thiel-founded parent company

What the deal does for Tilray is grants it increased flexibility.

“We believe the proposed transaction alleviates the risk of the share overhang and the upcoming release of 75M shares into the publicly tradable market float,” Fortune wrote. “The transaction extends the lock-up up to two years and allows TLRY operating flexibility and greater control for the sale of such shares only under certain circumstances.”

Tilray is a British Columbia-based cannabis producer and distributor.

Contact Andrew Kessel at [email protected]

Follow him on Twitter @andrew_kessel

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