Article

DON'T LET THE WAVE DROWN YOU

March 19, 2019

 

Tilray Inc. (TLRY) trading lower ($70.75 - $1.75 posted a wider-than-expected fourth quarter loss, even though sales nearly tripled in a growing global market for medical marijuana.

TLRY said earnings for the three months ending in December were pegged at a net loss of 33 cents per share, compared to a 4 cents per share profit from the same period in 2017, a figure it put down to "operating expenses related to growth initiatives, expansion of international teams and costs related to financings and M&A activities." Group sales, however, rose more than 200% to $15.5 million, while total kilogram equivalents increased nearly three-fold to 2,053 and the average net selling price rose 5.5% to $7.52 per gram.
"We are still in the early stages of the global transformation of $150 billion worldwide industry," Tilray CEO Brendan Kennedy told investors on a conference call late Monday. "We believe that over the long-term companies such as Tilray with the portfolio of trusted brands powered by multinational supply chain, will win the market by earning the confidence of patients, consumers, and governments around the world."
timeshares were marked 0.24% higher Tuesday and changing hands at $72.60 each, a move that would extend the stocks' year-to-date gain to around 3.5% and value the Nanaimo, British Columbia-based group at around $6.7 billion.

Kennedy, however, also noted that gross margins for the fourth quarter were nearly a third the rate of the previous period, as just 20%, thanks to increased procurement costs and taxes for medical patients. He also said margins would be further pressured by the group's international expansion plans, which includes a new facility in Portugal, and what he called a "temporary lack of industry supply."

"Longer term, we continue to expect 50% plus gross margins as we lower our costs through rate greenhouse and outdoor cultivation, and as we ramp those facilities past the start-up phase," Kennedy said. "We also expect reduced revenue per unit as selling wholesale, and the adult-use market becomes a bigger mix of our revenues."

NOW FOR THE REAL DEAL
TILRY is the first of the "White Dinosaurs"  that was created solely on the ability to raise big money on a great idea. Granted: legal cannabis use a is a major social revolution and a profitable commodity. But to create a company with, apparently, the single purpose of raising money and make insiders risk should not be the only objective.  
We recommended the stock at the public offering price with a range of $20.75 to $31.00 when our Subjective Porbability+Game Theory Model (SP+GTM) algorithm confirmed as "safe investment with a limited downside risk rating of =91, which meant a 91% chance that the investment would appreciate. It did, rewarding our followers when a few months later the stock reached $300. At that point, the SP=GTM rating dropped to =31,  signaling a major sell. Immediately, we announced -- TAKE PROFITS, SELLING OUT POSITION AT THE MARKET. Based on our records, the based liquidation price, on average, was $291.

Since the inception of First Jersey Cannabis Corporation, our objective was to design a business model that would take advantage of the potential growth of cannabis and hemp as valuable consumer products. As the emerging industries lacked reference points, and only viewed as an illegal Controlled Substance on federal drug laws little could be garnered in documented research and data gathering, the only source materials were available from states that sanctioned its use either for medical or adult use purpose. Since then we have gathered data and are still not comfortable as to the viability of the known business modeling are designed based on the individuals and companies operating in states where the commodities are legal to cultivate and distribute. Our attempt to embrace the Canadian model, which nationalized cannabis on October 17, 2018, proved less than perfect because the black market sponsors 90% of the known cannabis market, was very little data available except for "estimates" provided by the country.
Therefore, we were left with the data from states that approved cannabis for cultivating and distribution, and the public companies that accepted to create a business model to function with a narrow market. Our conclusion is not sufficient to establish a viable business model and to commit our resources to further data gathering by focusing on public companies that are required by law to result in their results.
The data from these sources are startling. No one public company is granted a consistent positive cash flow from operations, earning a profit and relay exclusively of private and public funding to remain in business.
A business model cannot be designed in a vacuum or can be executed with facts that do not remain constant.   Therefore, designing a viable business model cannot be effectively concluded until more data is collected and a real business trend established.
During our "test tube place," we have focused on TLRY since their company represents a business model in progress.   The data gained from our research is essential to design a business model that would be effective.
Our Tilry Inc. filed its S-1 with the Securities and Exchange Commission, it stated under risk factors "We have limited operating history and a history of new losses, and we may not be achieved or maintain profitability in the future," page 20, under General Business Risk and Risks Related to our Financial Conditions and operations. March 16, 2018.
The statements made in the SEC filing are truth to our argument that proves to be the current state of affairs at Tilry Inc. 

By the numbers:
Market  Capitalization:    $6.78 billion
Book  Value:                      $2.02 per share
Revenue:                           $32 million
Shares Outstanding         79 million
    Float                             12 million shares available to trade

... from Subjective Probability+Game Theory Model  data

Based on $1.00 of gross revenue
Cost of cultivation (cannabis)                        $1.01
Excise taxes and other related costs                  .52
Sdninsyratiev and Genral                                  .32
Ohrers                                                                 .13
Total cost  of gross revenue                            $1.98

Loss per $1.00 of gross revenue                      $0.98

In other words, TLRY's business model loses $0.98 on every dollar in gross revenue. Which means, the more sales TLRY generates the more money they lose because economy of scale does not apply.

 

Reviewing the actual numbers in total and their own assessment "never to make a profit" the TRLY's  business model is great to follow as an example of what not to do or unless your an insider and founder.

 

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