Cannabis producer Tilray taps private equity funding

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Publicly traded cannabis companies are not the only ones attracting big money from investors – private firms are getting in on the action, too.

Tilray Inc., a privately owned licensed producer (LP) in Nanaimo, B.C., will announce Thursday that it has raised $60-million to expand its growing capacity in Canada and Europe and to push its brand of medical cannabis products into a handful of new countries.

The Series A round of funding follows a string of stock sales that have seen many public marijuana firms raise millions without working up much of a sweat. Those efforts have been buoyed by share prices that have soared in recent weeks, fuelled by a barrage of news as Canada moves closer to legalizing the drug for recreational use this summer.

Speculation that Tilray is eyeing an initial public offering is rampant on Bay Street. In an interview, CEO Brendan Kennedy declined to reveal the company's financing plans, saying that Tilray's focus is on its business – not on the hype.

"There's a lot of noise in this industry in Canada. There's a lot of unusual accounting, a lot of unusual press releases, lots of grand pronouncements and empty promises being made by some of these companies," he said. "As a private company, we don't have to get into that fray. We can just focus on hitting milestone after milestone and not driving our public company's stock up."

Founded in 2013, Tilray sits in a portfolio of cannabis assets owned by Privateer Holdings Inc., a private equity firm run out of Seattle. It also owns Leafly, a website about cannabis and where to buy it; branded product line Marley Natural, named after singer Bob Marley, that is sold in California, Oregon and Washington state; and edibles maker Goodship, which is also sold in Washington state.

Privateer has raised a total of US$200-million over three financing rounds. The first closed in late 2013. The latest marks the first time that outside investments have been made directly into Tilray, as opposed to through Privateer.

"There's been some investors in the past who were looking at Privateer and were very interested in Tilray but they didn't necessarily believe in every single company in the portfolio," said Mr. Kennedy, who is also the CEO of Privateer. "Doing a round into Tilray enabled us to focus on investors who believe in Tilray – our story and our strategy."

He said the cash is coming mostly from investors in the United States and many who are new to the legal cannabis sector. Behind the lead order is a U.S. private equity firm that manages US$25-billion in assets. Privateer has the backing of venture capitalist Peter Thiel's Founders Fund.

Tilray products are currently available in eight countries, including Australia, New Zealand and Germany. It plans to expand into five more over the next six months. The company is expanding its growing and processing facilities in Ontario and is constructing a greenhouse in Portugal.

As with many other cannabis firms, it is growing fast and will likely have to raise more money to keep getting bigger. Whether it taps the private or public markets next will depend a lot on market conditions, Mr. Kennedy said.

But he can't help but watch his rivals using their shares to fund pricey takeovers. "I used to say that the only LPs that were going public were the ones that couldn't raise private capital. However, for the companies that have gone public, it's an easier, more efficient capital-raising process."