Shares of Canadian cannabis company Tilray jumped nearly 5% in extended trading on Tuesday after announcing it invested American cannabis retailer Medmen.
In the deal, Tilray and other investors acquired 75% of Medmen’s outstanding secured convertible notes from Gotham Green Partners and 65% of its outstanding warrants for $165.8 million. Once converted into stock, Tilray will have a minority stake in Medmen. Conversion of the stake is subject to regulatory approvals, U.S. legalization and other factors.
Should cannabis be legalized at the federal level in the U.S., Tilray’s interest could help it establish a foothold in the U.S., Tilray said.
“What Medmen does for Tilray is that it gives us a great brand. Ultimately, once legalization happens, it gives us the potential to own a great company that we can ultimately take into the rest of the world,” said Irwin Simon, Tilray’s chairman and CEO, in an interview Tuesday on CNBC’s “Closing Bell.”
While Medmen is a recognized brand, it has struggled with losses in recent years, and its market value has dwindled to less than $200 million. The company operates 25 retail stores and expects to open more than five more this year.
Correction: An earlier version of this story said the deal gave Tilray a majority stake in Medmen. The investment actually allows Tilray to buy a majority stake in Gotham Green Partners’ convertible notes, which once converted would represent a minority stake in Medmen.
