Peter Thiel-Backed Fund Hits the Jackpot With $12 Billion Tilray Stake
(Bloomberg) -- The massive surge in pot stock Tilray Inc. has delivered a multi billion dollar windfall for a little-known private equity fund backed by investor Peter Thiel.
Privateer Holdings Inc., a Seattle-based fund started seven years ago to focus on the marijuana business, holds 76 percent of Tilray, a stake now worth more than $12 billion after the stock soared more than 10-fold from its July public offering.
Tilray, a Canadian company with just $20 million in revenue last year, has benefited from the surge in demand for pot stocks as Canada gears up to legalize the drug next month, and companies including Coca-Cola Co. and Diageo Plc show interest in the sector.
Thiel’s Founders Fund became the first institutional investor in the cannabis industry through Privateer Holdings’ $75 million Series B financing round in December 2014, according to the company’s website.
Thiel, 50, was an early investor in Facebook Inc. and is known for making unconventional investments in different industries. Founders Fund has also backed Airbnb Inc., Lyft Inc., Space Exploration Technologies Corp. and Palantir Technologies Inc.
Tilray, based in the Vancouver Island town of Nanaimo, has drawn more interest than most pot stocks, in part due to its listing on the Nasdaq, making it easier for U.S. investors and hedge funds to get a piece of the action. The limited number of shares available for trading may also be adding to the volatility, making it more expensive for skeptical investors to short the stock.
Citron Research said it remains short on Tilray, calling the stock’s surge “beyond comprehension” in a Tweet Wednesday.
Bigger Than American
Tilray has now surpassed Canopy Growth Corp. as the world’s largest cannabis company. Canopy, which added a New York listing to its Canadian trading in May, is worth $12 billion.
Tilray jumped as much 55 percent to in New York Wednesday to $240, giving it a value of more than $20 billion, higher than American Airlines Group Inc. Cowen & Co. took the company public in July at $17. The stock closed up 38 percent at $214, after a late swoon and partial recovery.
Brendan Kennedy, Michael Blue and Christian Groh founded Seattle-based Privateer in May 2010 and the firm later invested in Tilray. The trio effectively owned about 45 percent of Privateer’s holdings in Tilray as of March 31, according to the cannabis company’s prospectus. The Privateer founders’ stake in Tilray was valued at $7.9 billion as of 12:15 p.m. in New York, giving each a net worth of at least $2.6 billion, assuming they hold equal stakes.
When Tilray’s unlisted Class 1 shares are included, Privateer’s holdings rise to almost 75 million shares, worth more than $15 billion.
Kennedy, 46, serves as Tilray’s chief executive officer. Kennedy and Blue are both graduates of Yale School of Management’s MBA program, while Kennedy and Groh worked together at SVB Analytics, a non-bank affiliate of Silicon Valley bank.
Tilray, which has agreements to sell pot in Canadian pharmacies including Shoppers Drug Mart, has ambitious plans well beyond Canada. It’s focused on medicinal marijuana in 12 countries that span five continents.
“Our long-term vision is if a patient walks into any pharmacy in any country in the world that has legalized cannabis that patient should be able to obtain a Tilray product. That’s our global goal,” Kennedy said in an interview this week from New York.
Tilray is investing in production capacity in Portugal so it can supply products to the EU from within Europe, he said. The company also has its High Park brand for the recreational market in Canada, which has secured supply agreements with seven provinces and territories, Kennedy said. The company also has a deal to develop medicinal cannabis with the Canadian division of Novartis AG of Switzerland.
Kennedy said he’s not interested in getting taken over by a large consumer company. In a testament to the euphoria surrounding the space, he claimed the company may one day be worth more than $100 billion.
“I don’t want to get bought by AB-InBev or Diageo, I want to be that company,” he added.
©2018 Bloomberg L.P.