Google. Apple. Cisco. We’ve all heard the stories of legendary initial public offerings (IPOs) that resulted in huge gains for early investors.
And last Thursday, investors clamored to buy shares of Wall Street’s first IPO in the marijuana industry.
By going public in the U.S., Canadian cannabis producer Tilray Inc. (Nasdaq: TLRY) raised $153 million ahead of Canada’s nationwide legalization, slated for October 17.
Initially priced at $17, the stock jumped more than 30% the day of its offering, closing at $22.39. The next day, it closed at $29.77.
I’m sure plenty of investors were wondering: Did I miss out? Should I get in now? Is this just the beginning?
I knew what to do, though.
I’d reached out to our natural resources expert, Matt Badiali, early last week to get his thoughts on the IPO.
IPO Hype
Matt’s my go-to on commodities.
He’s not one to shy away from controversial opportunities like the one in Tilray.
In fact, he traveled to Portland, Oregon, earlier this year to visit growers and dispensaries in his research on the marijuana industry.
But he advised against investing in Tilray right away, no matter how exciting this opportunity is in the long term.
“I’m always leery about IPOs. So many of those spikes are based on the hype, not the company itself.”
He’s absolutely right. Plenty of IPOs are busts.
Last year, Snapchat owner Snap Inc. (NYSE: SNAP) made news when its shares popped immediately after its IPO.
Like Tilray, it was first priced at $17. It closed at $27 after two days.
But the euphoria didn’t last. Shares began to fall on the third day. It took less than four months for Snap to fall back down to $17.
Investors who bought on the hype lost as much as two-thirds of their investment.
Even those lucky enough to buy at $17 saw their initial gains wiped away. Now the stock languishes around $13.
Making Money With Marijuana
So how do we separate the Googles from the Snaps at such an early stage?
Well, investors who got in years after Google’s IPO still made plenty of money.
Smart investors might be better off letting the hype die down. Wait until we have some data to review after the IPO, then consider a position.
And if you don’t know how to analyze data, let an expert do it for you. Matt Badiali recently recommended five marijuana stocks that he’s convinced will soar by quadruple digits.
He tells me he’ll be watching Tilray. If it looks like a good buy, he’ll let his readers know the perfect time to get in.
Good investing,
Kristen Barrett
Managing Editor, Banyan Hill Publishing