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matter of the bugs. In lieu of pesticides, Tilray
spends about $100,000 a month on insects
that eat other pests (they arrive in pouches
that look like tea bags).
In five years, Kennedy hopes, 90% of the
pot Tilray sells will be cultivated by other
companies. “I never thought, ‘In my next busi-
ness, I want to be a farmer,’ ” he says. Rather,
he models himself after Joseph Kennedy
(no relation), the patriarch of the political
dynasty who, as Prohibition was sunsetting,
traveled abroad acquiring import rights to
liquor brands like Dewar’s Scotch whisky and
Gordon’s gin. And Brendan Kennedy has com-
plete conviction that “the end is near” for U.S.
cannabis prohibition. “I don’t know when the
Berlin Wall will topple over, but we’re getting
closer and closer to that point,” he says.
It may happen sooner than people think,
thanks to the drumbeat of next year’s presi-
dential election. More of the public now views
marijuana as a salve for confounding prob-
lems from the opioid crisis (overdose deaths
dropped 21% to 25% in states with medical
marijuana laws, a 2018 study by the think tank
Rand found) to government deficits. Demo-
cratic hopefuls have signaled they will cham-
pion the issue. On the other side of the aisle, a
recent Gallup poll found 53% of Republicans
now support legalizing marijuana. That shift is
owing in part to a concerted effort by advocates
to reframe the debate in terms of states’ rights.
Among the people persuaded by that argu-
ment is President Trump, who has pledged to
back legislation that would protect states’ mari-
juana laws from federal interference. And in a
fraught campaign season, legalization could be
a winning play. “We could envision a scenario
in 2020 where the Trump administration
could actually deem it politically advanta-
geous to co-opt the issue from the Democrats
and come out the hero,” Vivien Azer, an ana-
lyst at Cowen, told reporters in early January.
If Kennedy were setting a line in Vegas, he
likes to say, he would pick 2021 as the year
the U.S. will legalize cannabis. If he’s wrong,
and the U.S. doesn’t budge? Not the end of the
world, he says; he expects medical legalization
to double to 70 other countries by then. Sure,
as an American business leader, he’d feel let
down by his government: “They’ll basically be
ensuring that the companies that dominate
this industry in the next decade are all based
outside the U.S.” For the CEO of a Canadian
company, though, that’s not really a problem.be squeamish about working with it, according to John F. Walsh,
the former U.S. attorney for Colorado who is now a partner at
WilmerHale. “Under U.S. law, if there is essentially drug activity
going on in another country that is entirely legal in that other
country, it is not a U.S. federal narcotics crime,” Walsh says.
Importantly for investors, he adds, that means Americans who
finance such a “foreign legal marijuana business” would not be
violating U.S. anti–money laundering laws: “It is pretty clear-cut.”
Yet no one imagined Tilray would soon be worth more than
Snapchat. Kyle Lui, a partner at DCM Ventures, strikes a wistful
tone when he admits that he passed on investing in Tilray when
it raised money privately, balking at its nearly $1 billion valua-
tion, in early 2018. “I don’t think we could have anticipated that
the public markets in the U.S. would have received Tilray to the
extent that they have,” says Lui.
Even after retreating more than halfway from its peak, Tilray’s
stock is the poster child of the so-called marijuana bubble. Valu-
ations like Tilray’s—trading at around 50 times estimated sales—
have rarely been seen since the dotcom boom, says Chris Brown,
founder of the $111 million hedge fund Aristides Capital. Brown
didn’t even bother to model Tilray’s future sales before deciding
to short it, a move that so far has earned him nearly $1.5 million:
“When the price for something is so high, I think the onus is on
Tilray to be the most perfect, magical, wonderful exception in
the world.”
That world is a highly fractured one. Tilray has the largest
international footprint among legal-weed companies and is can-
nabis’s second-biggest player (after Canada’s Canopy Growth),
but its estimated market share is only 8% in Canada, and less
than 1% everywhere else. Still, Moez Kassam, cofounder and
principal of Toronto hedge fund Anson Funds, which financed
most of Canada’s public cannabis companies, was convinced
after visiting Nanaimo that Tilray would eventually take the
lead. “You knew this was a best-in-class business,” Kassam says.
“I think Tilray will be considered cheap in a few years.”
Even Kennedy, previously a valuation expert, has trouble put-
ting a number on how big Tilray could be. For the foreseeable fu-
ture, he notes, his priority is growth, not profit. (“Think Amazon,
not Kroger.”) Because black market sales dwarf legal ones glob-
ally, it’s impossible to size up true demand for cannabis, or how
large it might become. Legalization will enable clinical research
that could discover veritable Russian nesting dolls of new uses
for cannabis’s hundreds of compounds, but that research could
also bring new complications: Initial studies show possible ugly
side effects to regular pot use, from dependence to psychosis.
Legalization also means more competition—including from
small American operators currently confined to states that
have legalized—and the price pressures of what is ultimately a
commodity-driven business. Kennedy has already become fa-
miliar with the singular joys of agriculture. Before Tilray could
open its Ontario marijuana farm, it first had to harvest the red
and green peppers that were growing there. Then there’s the
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