- Tilray surged Wednesday after reaching a $165.8 million investment deal with MedMen.
- Tilray is investing in MedMen to position itself into the US retail market for cannabis should it be legalized on the federal level.
- The Canadian company is making the investment through acquiring convertible notes and warrants.
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Tilray shares popped higher Wednesday after the Canadian cannabis cultivator and distributor said it has invested in MedMen to position itself in the US retail market if and when cannabis is legalized on the federal level.
Shares of Tilray gained as much as 7.2% to $14.06 during the regular session then trimmed the advance to 5%. The stock this year has gained about 59% through Tuesday's session. In May, Tilray completed its merger with Aphria.
Tilray along with other investors in a newly formed limited partnership bought 75% of MedMen's outstanding senior secured convertible notes originally held by private equity firm Gotham Green Partners, and 65% of outstanding warrants for $165.8 million.
MenMed runs more than 25 stores in six states, including California, the biggest marijuana market worldwide. Tilray called MedMen one of the most recognized brands in the $80 billion US cannabis market.
"Backed by accelerating trends towards legalization globally, we are focused on building the world's leading cannabis-focused consumer-branded company with a goal of $4 billion of revenue by the end of our fiscal 2024," said Irwin Simon, Tilray's chairman and CEO, in a statement.
The MedMen investment "is a critical step towards delivering on our objective as we work to enable Tilray to lead the US market when legalization allows," he said.
Tilray said it will issue 9 million shares of its common stock to Gotham Green Partners pending approval by shareholders. A special shareholders meeting will be held on Thursday. If Tilray hasn't received shareholder approval by Dec. 1, Gotham Green Partners may receive cash rather than Tilray shares.