Tilray, Inc. (NASDAQ:TLRY), is far from the trading high at US$29 in February 2021 as the stock is currently searching for a bottom. The company has a gap in performance and a wide area of possible outcomes. The last earnings report has re-motivated some investors, and perhaps the company will indeed show meaningful growth, but until then, we will look at what the shareholder composition says about the company.
When analyzing shareholder ownership in companies, typically we want to see at least 2 things.
One that the management has a significant stake in the success of the company. Meaning that they own stock and share in the pain or gain of their decisions. Second, that institutions have at least as much as the public and are continuously buying more shares.
These signals are strong enough to show if we are dealing with a company that has potential or if there are significant risks which can complicate an investment approach. Note, that high risks can also be priced, and investors can come out with high gains, but this is usually a landscape where, at least until recently, professionals had the advantage.
Tilray is a pretty big company. It has a market capitalization of US$5.1b. Normally, institutions would own a significant portion of a company this size.
Our analysis of the ownership of the company, below, shows a very unusual picture of stockholder composition.
We will zoom in on the different ownership groups, and analyze them independently.
What Does The Institutional Ownership Tell Us About Tilray?
As you can see, institutional investors have a very small stake in Tilray.
The low institutional holding suggests that investors have deemed that this company is not performing enough now, and possibly will not be performing in the future. Additionally, the company is losing money, has US$776m debt (long-term plus convertible) and little (US$376m) cash to offset this, which makes it even riskier.
As you can see in our future estimates section, analysts estimate a possible bright future for Tilray, and predict US$1.3b revenue by the first half of 2024. The company's free cash flows also paint a different picture from what we are seeing in profits, and are far closer to breaking even. Current quarterly free cash flows are US$-109m, but analysts project near-zero free cash flows by mid 2022.
All, of this, has shaken institutional ownership over the years, and the company will need to perform for a while before it restores confidence in large shareholders.
Tilray is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is ETF Managers Group LLC with 1.8% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 1.8% and 1.5%, of the shares outstanding, respectively.
On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.
Insider Ownership Of Tilray
Shareholders would probably be interested to learn that insiders own shares in Tilray, Inc.. The insiders have a small stake worth US$212m or 4.2%. Unfortunately, there isn't too much we can read into that fact, as it depends on the individual commitment and skill of the leadership.
If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.
General Public Ownership
The general public collectively holds 83% of Tilray shares, making it the largest shareholder group.
A large general public stake may mean that there is an absence of high buying power for the stock, and that most of the holders are passively waiting on the stock to rise.
While this is bad for long-term holders, the daily trading scene may benefit and see more volatility from the stock. There are possible short-term catalysts for the stock price, such as strategy announcements, change in the growth of the cannabis market, quarterly earnings events etc.
Institutions are absent from the stock. By looking at the current performance, one can infer a significant risk in long-term investing in Tilray. Unless the company improves markedly and consistently, we have no indication that the larger players will be significantly increasing their stake.
The future of the stock is projected to be much better than today. That is why some investors see positive asymmetry in the stock and others are playing on short-term catalysts to counter the downtrend and make daily gains.
While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 2 warning signs for Tilray (1 is a bit unpleasant!) that you should be aware of before investing here.
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
What are the risks and opportunities for Tilray Brands?
Trading at 30.2% below our estimate of its fair value
Revenue is forecast to grow 12.18% per year
Shareholders have been diluted in the past year
Currently unprofitable and not forecast to become profitable over the next 3 years
Simply Wall St analyst Goran Damchevski and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Goran is an Equity Analyst and Writer at Simply Wall St over 4 years of experience in financial analysis and company research. Personally, Goran has over 4 years of experience in financial analysis and company research, where he previously worked in a seed-stage startup as a capital markets research analyst and product lead and developed a financial data platform for equity investors.
Tilray Brands, Inc. engages in the research, cultivation, production, marketing, and distribution of medical cannabis products in Canada, the United States, Europe, Australia, New Zealand, Latin America, and internationally.
Good value with adequate balance sheet.