Stock Market Valuation and Success - IPO

• Did the company value the IPO correctly?

Tilray Inc. is the first marijuana-related company to IPO on the United States stock market. Its IPO started trading on July 19, 2018 at a share price of $17 per share and raised $153 million under the ticker TLRY (Cherney, 2018). Its initial market value was $1.4B ahead of its IPO. Since the companys IPO their value has been very volatile but it has stayed above its initial IPO price so I believe their initial valuation on the IPO was correct.

• Was the company able to generate additional value for shareholders via the IPO?

Shareholders of Tilray, both initial and the ones who bought in after the IPO, have gained a lot of value since the IPO. After the IPO price of $17, the stock started soaring in price generating a lot of value. Its IPO was in July and by August, the stock price had doubled to $30. Then in September, 2018 it skyrocketed to over $300 (Investopedia, 2018) per share creating a nearly 1,700% value increase. At this point the value of Tilray had reached $20 billion and the investors and shareholders had amazing gains from this sudden increase. Since September however, it has come down since then to a price of $50.23 as of closing on May 2, 2019.

• What economic and market factors potentially influenced the results of the IPO?

The first major factor that affected the IPO of Tilray is the legalization of marijuana in Canada on June 20, 2018 (Sapra, 2018). This was about a month before the IPO of Tilray and played a large part in the valuation of the IPO because Tilray is a Canadian company and will produce under the new rules in Canada. As I stated above, in September the value of Tilray shares skyrocketed to above $300 during the mid-day trading session. This was because the Drug Enforcement Agency gave Tilray permission to export marijuana products into the U.S. This was a big deal for the company because they were the first company to get this approval. Tilray is a medical marijuana company and the U.S. only has one federally-approved facility to grow marijuana which makes the supply of the drug very slow (Marijuana Companies That Legally Export Cannabis to the U.S., 2018). Tilray getting approval for this first gives them an edge on competitors so the value of the IPO was seen as too low which brought a lot of investors in and raised the share price to over $300.

• Do you think the IPO was a success based on your analysis?

Based on the analysis, I would say Tilray has had a successful IPO because the price jumped as high as $300 within 2 months from an initial offering of $17. Currently their share price is still over double the initial offering, so the initial investors who did not sell during the huge price increase are still relatively happy.

For Chegg: explain whether you agree or disagree with the above assessments of my Selected IPO. Can you identify additional economic and market factors that may have influenced the results of the IPO?