Tilray’s (regulated) road to IPO: Lessons from one of the first publicly-traded cannabis companies


Just a few years ago, it would have seemed unthinkable for a cannabis company to go public in the U.S. Even today, it’s not a common path. While more and more states and countries are legalizing cannabis, it’s still illegal at the federal level in the United States. Plus, it’s difficult to know how the market will react to a cannabis company.

Tilray, a global leader in medical cannabis, decided to IPO anyway. Many U.S. cannabis companies are starting choose the IPO path, but go public in Canada due to regulations set by U.S. exchanges. Tilray found themselves in the opposite situation: they are a Canadian company who went public in the U.S.

When Tom McGaugh joined Tilray as Director of Finance four years ago, the company was already eyeing an IPO, and one of his goals was to get them ready. “In order to do that, you have to be transparent, follow the rules, and have strong oversight of your fiscal responsibilities.” Tilray looked to set the standard for clean, compliant business processes in the burgeoning and highly-regulated cannabis industry.

This past summer, they became the first Canadian cannabis company to file for an initial public offering on a U.S. stock exchange, raising $153 million at $17 per share. We chatted with Tom about Tilray’s road to IPO, and their decision to choose Carta as a partner on this path.

The cannabis challenge

Being in the cannabis business, Tilray is no stranger to regulations, even before going public. They’ve had to keep pace with ever-changing regulations on the manufacturing and distribution of their products. Luckily, most of the recent shifts have been in the industry’s favor.

Of the recent regulatory changes, Tom says, “the biggest impact has been on our ability to import and export cannabis globally. Especially in Canada, the new rules allow us to do more exporting then we had been able to do in the past. Also, recent changes in Canadian medical marijuana policy have allowed for more patient access and have allowed us to really take advantage of the medical marketplace.” Tilray has operations in Canada, Germany, Australia, New Zealand, Portugal, and Chile (through the recently-announced Tilray Latin America affiliate).

Tilray recently received approval from the U.S. Drug Enforcement Administration agency (DEA) to ship cannabis to the U.S. for a clinical trial. Outside of that limited engagement, “we do not transact cannabis in the U.S. We’re really thinking about Canada, and all the other foreign jurisdictions where they’re making more progress [on decriminalizing cannabis] than the U.S. When the Farm Bill gets introduced, that’s going to open things up more, where we’ll start to look at more opportunities in the U.S.”

Given the complex and evolving nature of cannabis regulations, Tom and his team initially found it difficult to find service providers that were willing to work with them. “None of the Big Four accounting firms in the U.S. would touch us. Same with large, federally regulated banks,” he said. Finding providers like Carta who are willing to help Tilray pioneer IPOs in this industry “was a huge leap for us.”

Where to go public? U.S. or Canada

Operating in Canada proved helpful to Tilray when going public, because it allowed them to list in the U.S. A major factor in Tilray gaining approval to list on Nasdaq, a U.S. stock exchange, was the fact that they did not operate in the U.S. at the time. That made it easy for them to comply with U.S. cannabis laws and regulations.

Companies that violate federal or state cannabis laws are not allowed to list on U.S. stock exchanges. That’s why we’ve seen many U.S.-based cannabis companies list on Canadian stock exchanges like the CSE (Canadian Securities Exchange).

Still, Tilray could have chosen to go public in their home country of Canada. Their decision to list on Nasdaq was largely driven by the name recognition Nasdaq provides as the second-largest stock exchange in the world, and the volume of potential investors on Nasdaq.

Here are some things to think about if you’re a cannabis company considering going public:

Going public in the U.S.Going public in Canada
Large exchanges with strong name recognitionSmaller, lesser-known exchanges
Lots of big institutional investors, but most are new to investing in the cannabis industryFewer investors, but they tend to be comfortable with the cannabis industry
Rules and regulations changing frequentlyClearer path to IPO since cannabis is legal nationwide

Even though Tilray met the requirement of not operating in the U.S., “It was a very large hurdle for us to get approved by Nasdaq,” Tom says. Any company listing on Nasdaq has to go through a lengthy and intensive process to ensure they meet liquidity, solvency, corporate governance, securities exchange, and regulatory requirements. Tilray’s financial and operating documentation was undoubtedly examined extra closely for details on how and where the company operates, to ensure they were not breaking any U.S. federal cannabis laws.  

Managing ownership at every stage

Tilray had been using Carta to manage equity as a privately-held company, and their employees loved using the product. As Tom puts it, “Carta helps employees that have stock options for the very first time understand what their equity means and what it’s worth. And it also has the tools necessary for more sophisticated users and stakeholders.”

It was a natural choice for Tilray to continue to use Carta when they transitioned to a public company. Tilray uses Carta as both their transfer agent and equity plan administrator. Tom breaks down the benefits of Tilray’s partnership with Carta:

  • Same platform: “The initial public company implementation was a great experience. The Carta team handled the majority of the work. They flipped us over to the public company instance [of the product] without there being a lot of touch on my side.”
  • Fewer errors and reduced legal fees: “We’ve had to use our legal counsel less for equity administration with Carta because now it’s electronic. We have fewer paper based certificates, less manual tracking, less back and forth, and fewer errors.”
  • Dedicated resources for complex situations: “As a brand-new public company with employees in multiple jurisdictions, trying to understand all the different tax implications can be challenging. Our Carta relationship manager has been my go-to person for any kind of need. We have a lot of questions and he’s very responsive.”

The team anticipates even more benefits moving forward. “We’re going to see more cost savings as we start to have more exercises and sales as a public company. If we didn’t have Carta, this would be a massive manual endeavor,” says Tom.

Carta is proud to partner with Tilray in their quest to lead, legitimize, and define the future of their industry. We’re also excited to lead the way in supporting companies at all stages of growth. To learn more about Carta for public companies, contact our sales team.

For more information on Tilray, we recommend this article from Fortune.


DISCLOSURE: This communication is being sent on behalf of eShares, Inc. dba Carta, Inc. (“Carta”).  Transfer agent services are provided by a Carta affiliate, Philadelphia Stock Transfer, Inc. Certain transactional fees may apply. This communication is not to be construed as legal, financial or tax advice and is for informational purposes only. This communication is not intended as a recommendation, offer or solicitation for the purchase or sale of any security. Carta does not assume any liability for reliance on the information provided herein.


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