Tilray's CEO Expects at Least a Dozen Cannabis Bankruptcies in 2020 -- Is He Right?
There's a lot of doom and gloom in the cannabis industry. It's hard to avoid when even the Horizons Marijuana Life Sciences ETF (OTC: HMLSF) has crashed 65% in the past year. Many cannabis companies have continued to struggle to stay out of the red even amid rapid growth. In the past that was fine, because their share prices were much stronger and they just had to issue more stock. But now it's getting harder to raise money. And with cash more scarce than ever before, many companies aren't far away from going completely under. Canadian cannabis company Tilray's (NASDAQ: TLRY) CEO believes that at least 12 marijuana companies will go under this year. Let's take a look at why he's so pessimistic and whether that's a reasonable estimate.
In March, Tilray announced that it would be raising $90.4 million through an offering, largely because the company still could. CEO Brendan Kennedy told BNN Bloomberg that he "wasn't sure anyone was going to be able to raise any money in this industry again" and that "when we had the opportunity to strengthen the balance sheet, we did."
Based on his connections and the information he's receiving from people in the industry, Kennedy's expecting to see at least another dozen companies go bankrupt, in addition to those that already have. Thus far, it's been small companies that have gone under. The biggest name to run into trouble has been CannTrust Holdings, which started crashing in July 2019 when investors learned the company was growing cannabis illegally. That was a result of CannTrust's ongoing scandal, but the bankruptcies that will happen this year will likely be due to liquidity issues.
Source Fool.com
