Tilray Shares Down 82%

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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. I have 250 shares with an average price of $19.83. As of 12/13/22 TLRY stock is trading at $3.60 per share. That means that my investment has lost 82% of its value. There are several reasons why the stock is doing so poorly. The first is rising interest rates. Companies like Tilray need to borrow money to expand their business. The second is that cannabis is not legal at the federal level in the United States. This means that banks cannot legally process transactions, which means that it is a cash only business in the States that have legalized cannabis products. Because of this, some investment firms are not allowing their customers to buy or hold cannabis stocks. Credit Suisse Group AG (NYSE:CS) was the first to tell customers it would no longer execute transactions in shares of cannabis companies with US operations, followed by JPMorgan Chase & Co.’s (NYSE:JPM) similar move last year, reported Reuters. Cannabis continues to be an issue for banks and other financial institutions due to its illegal status at the federal level.

When a brokerage decides to disallow cannabis stocks, they give you a deadline to transfer your shares to another provider, sell your shares, or they will sell them for you. This is what is happening with customers of a number of UK stockbrokers that have announced they will no longer support international cannabis-related stocks. Investors were hoping that the Secure and Fair Enforcement Banking Act of 2021 (SAFE Banking Act), and other marijuana reform legislation would pass in December 2022 as part of the NDAA and end up on President Biden’s desk. However, that didn’t happen. Even if the US passes cannabis reform legislation, companies like Tilray may find it difficult to expand into the US market. There are cannabis companies in California and other pro-cannabis states that are also waiting for federal legislation to pass and will be competition for any foreign cannabis company. Recently, oversupply has caused the price of cannabis to drop in the US. This is good for consumers, but not so good for companies that produce cannabis products.

So, why am I still holding onto Tilray stock? I think they have growth potential in markets outside of the US. About 10 percent of the float is short, keeping downward pressure on the stock. If the federal government ever decides to pass cannabis reform legislation, the stock could jump in value quickly. There is also a chance that we will see more consolidation in the cannabis industry. The longer interest rates stay high, and legislation fails to pass, the more cannabis mergers and acquisitions are likely. My investment is almost worthless to me at this point. Right now, it only holds value for me as a tax loss. Any time an investment depends on the federal government to change legislation you are going to have a long wait.

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