You may recall the headlines in September that Tilray Inc. had passed Canopy Growth Corp. as the world’s most valuable cannabis company – a milestone first reported by The Globe and Mail on the afternoon it occurred.
That was at the very beginning of the wild week of pot-stock trading that saw Tilray touch US$300 a share, and leave little doubt which company held the crown.
Tilray, however, has shed half its value. And later this month, Canopy will retake the lead, even if the two stocks don’t budge.
That’s because Canopy is poised to issue 104.5 million new shares to its partner, Constellation Brands Inc., as part of its $5-billion investment in Canopy. That transaction, approved by Canopy shareholders Sept. 26, should bump Canopy’s shares outstanding to somewhere in the neighbourhood of 326 million, from about 221 million now, according to the company’s most recent disclosures.
With that new share count, based on Wednesday’s closing prices of $63.32 for Canopy and US$156.83 for Tilray, Canopy would be valued at more than $20-billion, versus about $18.7-billion for Tilray.
(Market caps in Canadian dollars, for sake of easy comparison.)
That’s part of what some investors argued when they balked at The Globe’s story on the evening of Sept. 18 that said Tilray had passed Canopy at the close of that day’s trading. Some argued, in fact, that investors are also factoring in about 177 million Canopy stock warrants Constellation also holds as part of its investment over time.
Here, then, is a look at “fully diluted market capitalization,” which counts not only shares outstanding, but also stock that can be issued thanks to those warrants, as well as convertible debt and employee stock plans. (Let’s assume that given the run-up in the two companies’ stock prices, all the company’s options are in the money.)
As noted, Canopy is poised to have about 326 million shares outstanding later this month with the closing of the Constellation deal. Then, add the 177 million warrants, about 12 million shares underlying a convertible-debt issue, and 40 million shares underlying compensation plans (as of March 31, per a recent disclosure).
The total is about 556 million shares – and a fully-diluted market cap of more than $35-million at Wednesday’s close.
Tilray’s share count needs little adjustment. The company’s most recent quarterly report says there are just under eight million shares in employee stock plans that are not yet outstanding. That takes Tilray’s share count to just over 100 million, and its fully diluted market cap to just over $20-billion.
That’s not how the math will look in most databases individual investors use to bone up on companies. But savvy investors know how many shares Canopy ultimately may end up issuing – and how small a piece of that pie they get from owning one share on the market today.
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