APHA/TLRY Merger: Pros & ConsThere seems to be a lot of conflicting opinions on whether this merger was a positive or negative for APHA shareholders and for good reason. I think overall this merger will be generally a positive for the new "Tilray" shareholders but in the short term we will see a lot of volatility and may see a depressed SP until cost synergies and positive cash flow start to be realized in 1-2 years.
Pros:
- Access to 2.0 products (beverages, edibles) high margin products not explored previously by Aphria. Tilray with ABInv partnership (Fluent) selling CBD and THC beverages with 2.0 facility in
- Expanded production capacity with portugal cultivation facility (2.5M sqft) and direct access to EU market (3.9bn USD$ by 2025). Aphria's proven industry leading, lowest-cost per gram produced expertise and previous cultivation optimization, I think will greatly improve this facility from a cost perspective. The combination of CC Pharma distribution and Germany as the largest potential market (1.3bn US). Large first-mover advantage with Tilray into EU markets.
- Tilray's cost per gram produced was 5.38$ CAD Q1 2020, 5X more than Aphria's at 0.97$ CAD, as most recent quarter. Some simple math, if Aphria produced this instead and sold the same amount as Tilray did that quarter (5794KG sold) at its selling price of 7.16$ CAD= 35.86M CAD$ additional cannabis revenue for the quarter.
- Ability to leverage Tilray's distribution partners and access to 13,000+ retail stores in the US and online (Costco, Amazon, Whole Foods). Serves dual purpose: 1) Continue to introduce branding and increase consumer awareness of New Tilray prior to legalization in US with Sweetwater. 2) Continue to diversify revenue sources through Manitoba Hemp and medical CBD revenue (80M CAD/year)
- Tilray also world-leader in medical cannabis research and extraction with key global partnerships with Sandoz in EU. International medical cannabis revenue grew 40% (Q3 2019 Vs Q3 2020).
Cons:
- Tilray's balance sheet shows about 339M of current assests in intangible assets (phony assets) and 700M of liabilites. Total Assets (887M) - Intangible Assets (339M) - Liabilites (700M) = -152M Book Value WTF. (Yahoo Finance, Q3 2020)
- Total revenue growth over the last year from Q4 2019 to Q3 2020 has grown from 42M to 47M. 11% y/y TERRIBLE. Canadian market grew 58% from Jan 2020 to Aug 2020 --> Tilray losing market share to... Aphria?
- 4+ straight quarters of shareholder dilution, BLEEDING CASH. Aphria to the rescue??
Overall:
- Without Aphria, simply a matter of time until there would be no Tilray. TLRY shareholders completely bailed out by this merger.
- Aphria completely banking on taking over all production and leveraging Tilray distribution and partnerships to 100% ability. Any hiccups in this will cause major blowback by shareholders.
- Aphria and Tilray do complement each other in key production catagories: 2.0 line(TLRY) and low cost flower production (APHA) and EU market leadership looks promising.
- For the new "Tilray" to succeed: Aphria must "fix" the major issues within Tilray: high production costs, large debt and capital restructuring issues. Additionally, capitalizing perfectly on: Portugal cultivation excellence and EU market opening up, 2.0 product line rollout and demand increase, furthering cementing brands in the US (Sweetwater, Manitoba Hemp, Solei, RIFF etc).
The future of cannabis is here and spreading quickly across the world. I'm exicted to be a part of it with... Tilray LOL.
*Just my opinion, DYODD. GLTA LONGS*