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On Friday, Tilray stock traded $2 billion in shares, one of the highest single-day dollar volumes we have ever observed in the cannabis sector. To put things in perspective, the stock currently has a market cap of $2.6 billion based on the shares outstanding. Volumes across all cannabis stocks have exploded in general in this rally, reflecting growing demand ever since the Democrats gained control of the Senate, but 77% turnover in Tilray shares (even higher when considering the float) is rather extreme. Clearly, traders chasing higher prices and not investors are calling the shots in this stock, and we think the traders are making a $800 million mistake.
In December, Tilray agreed to merge with Aphria. While Aphria is acquiring Tilray, Tilray will be the surviving company. Specifically, each share of Aphria will be converted into 0.8381 shares of Tilray. Tilray shot up on the news of the deal on the first day, reflecting the premium it is receiving. On 12/15, the day before the deal was announced, Aphria closed at $8.12, and Tilray closed at $7.87. Since then, Tilray has substantially outperformed Aphria: