Tilray Brands stock price surged by over 15% in a high-volume environment on Wednesday. It soared to $0.4852, with its daily volume jumping to over $40 million, much higher than the three-month average of $26 million.
TLRY’s surge brought its market capitalization to $500 million, down from its all-time high of over $25 billion. This article explores what to expect for the Tilray stock price in the near term.
Why Tilray Brands stock price has crashed
While the Tilray share price jumped by over 15% on Wednesday, it remains about 65% below where it started the year at. It has also crashed by nearly 70% in the last 12 months, making it one of the worst-performing companies. In contrast, the Nasdaq 100 and S&P 500 indices have surged to their all-time highs.
First, Tilray Brands stock has plunged because of the ongoing woes in the cannabis industry. Indeed, other top cannabis stocks like Cronos, Canopy Growth, Curaleaf, and Cresco Labs have all plunged in the past few years.
The closely-watched AadvisorShares Pure Cannabis ETF (MSOS) has collapsed by over 35% this year and 65% in the last 12 months. As such, this performance is a sign that Tilray’s problems are part of a wider industry challenges.
Second, Tilray Brands stock has plunged because of the ongoing dilution of investors. Dilution happens when a company increases the number of shares outstanding, which reduces the stake of its shareholders.
Data shows that Tilray has 973 million of outstanding shares, a big increase from the 480 million it had in 2022 and the 450 it had in 2021. This means that its shareholders have gone through a 116% dilution.
The dilution has been steeper than that since the company had 133 million outstanding shares in 2020.
The company used some of the money it raised to execute some major acquisitions, including of firms like Manitoba Harvest, Natura Naturals, Aphria, MedMen, and HEXO Corp. Its market capitalization is now much smaller the combined value of its purchases.
US legal issues in the cannabis industry
Third, Tilray Brands has plunged because of the delayed legalization of cannabis in the United States. Cannabis remains illegal in the US under federal law and is still classified as a Schedule 1 drug.
Therefore, while many states have legalized cannabis, challenges in the industry remain. For example, many national banks continue to avoid cannabis companies because of the lack of legal clarity.
There is zero chance that the Congress will vote on cannabis legalization any time soon. These efforts even failed when Democrats controlled the House, Senate, and the presidency under Biden.
Tilray does not have cannabis operations in the US. Still, its stock has been affected since its goal was to venture into the country when legal conditions allowed.
Tilray Brands stock has also crashed because of its weak financials and substantial losses. The most recent results showed that its revenue dropped to $185.8 million in the third quarter, down from $188 million a year earlier. It also made a giant net loss of $793 million during the quarter.
Worse, the beverage division it is banking on continued deterioration. Its revenue increased to $55.9 million in Q3, up from $54.7 million in the same period last year.
Tilray stock price technical analysis
TLRY stock chart | Source: TradingView
The daily chart shows that the TLRY share price has been in a long-term decline and is now showing signs of bottoming ahead of its reverse stock split. It has formed a falling wedge pattern, a highly bullish pattern, which explains why the stock has rebounded.
Therefore, the stock will likely rise a bit ahead of the stock split and then resume its downtrend ahead of its split.
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