Under the terms of the merger, Tilray will issue up to 75 million company shares to equity holders of Privateer Holdings Inc and cancel 75 million shares currently owned by Privateer.
The shares represent 77% of Tilray’s total shares outstanding. The shares are subject to a lock-up, meaning the cannabis company has discretion over any sales of the stock for two years.
Tilray, based in Nanaimo, British Columbia, was originally financed by Privateer as one of its wholly-owned operating subsidiaries before closing a Series A round of capital in February 2018 and then becoming the first cannabis producer to complete an initial public offering on a major US stock exchange in July 2018.
Earlier this year, Privateer distributed its ownership of its three other operating subsidiaries unrelated to Tilray directly to Privateer stockholders, leaving no material assets in Privateer other than the 75 million shares it currently holds in Tilray, according to a statement.
During the first year following the closing of the merger, shares will be released at the discretion of Tilray. At the end of the first year, 50% of the total shares subject to the lock-up will be released.
Over the course of the second year following closing, the remaining shares will be subject to a staggered release in equal quarterly increments.
“We appreciate the long-term confidence that Privateer has in the Tilray business and we look forward to having their investors as part of our stockholder base,” said Tilray CFO Mark Castaneda. "We believe this transaction will give Tilray greater control and operating flexibility while allowing us to effectively manage our public float."
Michael Blue, managing partner of Privateer added: “We are pleased to sign this agreement with Tilray, which we believe will maximize overall returns for our visionary investors in a tax-efficient manner while giving Tilray the operating flexibility it needs to continue to be a leader in the rapidly emerging global cannabis industry.”
Shares of Tilray recently traded down 2% to $31.40.
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