Leading cannabis producer Tilray Brands (TLRY) has been hit with a short seller report from Kerrisdale Capital, which accuses the company of massively diluting its stock.
In the highly critical report, Kerrisdale Capital says that Tilray “has resorted to ongoing, shameless, and massive dilution to stay alive, even as management compensates itself generously while operating metrics further deteriorate.”
Kerrisdale, which has taken a short position in Tilray stock, goes on to say that the cannabis company “is just obscuring losses by issuing shares, instead of recording cash expenses, to one of its largest suppliers.”
Tilray, which is Canada’s biggest cannabis provider, remains unprofitable and has continued to struggle with slumping demand and competition from the black market.
Earlier this year, Tilray relocated its corporate headquarters to New York City from Toronto and announced the acquisition of several craft beer makers as it tries to diversity its business and focus on the U.S. market.
Tilray stock remains volatile and has been targeted on several occasions by retail investors who have treated the company as a meme stock and executed a short squeeze on its shares.
Kerrisdale’s report says that Tilray is “caught in a nonstop dilution cycle. It doesn't generate cash internally, and what cash it has on the balance sheet is largely thanks to dilutive equity offerings.”
The short seller report is also critical of Canada’s legal cannabis market, saying “Canadian cannabis industry fundamentals continue to implode…”
Kerrisdale’s report on Tilray concludes by saying “We believe shareholders are being intentionally misled.”
Tilray’s stock has declined 16% over the past 12 months and its share price currently sits at $3.24, making it a penny stock. The company’s stock has fallen 84% in the last two years.
