Amid growing concerns about the volatility of the cannabis market and its impact on Tilray’s recent downbeat stock price, Tilray’s CFO Carl Merton engaged directly with shareholders and industry enthusiasts last week in an Ask-Me-Anything session on Reddit.
Merton, responding to users under the name “TilrayIR,” fielded questions from users regarding the company’s path to profitability and the actions being taken to reduce costs, given the firm’s various acquisitions.
He also addressed concerns about the recent refinancing deal, clarifying that the move was aimed at securing lower interest rates and strengthening the balance sheet, not covering previous losses.
“We believe cash is king, and we remain focused on strengthening our balance sheet as well as our cash position by paying down a portion of debt and reinvesting in Tilray to further grow our global businesses,” he said.
Painting the Positive
In the forum, Merton detailed the company’s strategic focus, corporate actions, and outlook. He emphasized that the current stock price doesn’t fully reflect the intrinsic value of the company’s diversified portfolio.
As examples, he highlighted the company’s successful restructuring of Aphria into a leading cannabis licensed producer, expansion into more than 20 countries, and the U.S. alcoholic beverage portfolio.
Another notable achievement, according to Merton, was stabilizing Manitoba Harvest into a profitable entity, which he called the “world’s leading hemp foods brand.”
According to Merton, the company focuses on cash and adjusted EBITDA as key performance indicators. He touted that Tilray is the only public cannabis company with a history of positive adjusted EBITDA for 16 consecutive quarters, which all happened under CEO Irwin Simon’s leadership.
Reinforcing management’s approach to operations, Merton added, “We have relentlessly focused on optimizing our operations – matching production with demand, reducing costs, driving revenue, and generating free cash flow.”
He said that since the merger of Aphria and Tilray, the company has slashed costs by $122 million and is looking to further reduce costs by $16 million.
Merton also mentioned the complex dynamics in the global cannabis industry and Tilray’s response: diversification and fortification of the company’s balance sheet. He pointed out the successful acquisitions and growth in its diversified businesses, such as SweetWater Brewing, Manitoba Harvest and Breckenridge Distillery.
Still, many participants and observers appeared unconvinced.
Investors Seek Reassurance
User pdub1959 asked Merton for reassurances concerning the potential of a reverse stock split resulting from recent company actions.
Merton responded, writing, “I want to unequivocally state that the recent moves were not done as part of a plan to do a reverse stock split.”
Yet, another Reddit user pointed out a potential discrepancy in Merton’s statement, indicating that not planning for a reverse stock split doesn’t necessarily rule out its occurrence.
“‘They weren’t done as part of a plan’ isn’t the same as ‘they won’t result in,'” the user wrote. Merton did not respond directly to this comment during the AMA session.
He also countered claims that the refinancing deal and convertible note offer benefited short sellers, adding, “No shares were provided to short sellers to cover their existing positions.”
In response to concerns about executive compensation, Merton stated that Simon, the CEO, doesn’t have an annual base salary of $20 million or $30 million. In fact, more than 90% of Simon’s compensation and a substantial portion of the remaining executive team’s compensation are contingent on performance-based equity incentives.
According to SEC regulations, Tilray must report the full value of executive compensation, regardless of whether the targets are met, Merton emphasized. If the targets aren’t achieved, the executives receive none of that potential compensation.
He added that Simon and other top executives own more than 9.3 million Tilray shares and have not sold any in the open market, except to handle taxes.
“I hope by addressing these questions and reoccurring themes, I’ve helped clear the air,” he wrote.