Kerrisdale Capital said it is short Tilray, Inc. (NASDAQ:TLRY) in a report Monday, describing the company as a "failing cannabis player."
The short-seller added that the company is running a "familiar playbook for unsuccessful businesses trading in the public markets."
Tilray shares are down more than 6% following the report, trading around the $2.75 per share mark. However, it has gained 75% in the last three months.
"Given structurally unprofitable operations, the company has resorted to ongoing, shameless and massive dilution to stay alive, even as management compensates itself generously while operating metrics further deteriorate," argues Kerrisdale Capital.
The firm also claims Tilray is obscuring losses by issuing shares instead of recording cash expenses to one of its largest suppliers.
Kerrisdale contends that TLRY's "cannabis adjacent" diversification strategy is seeing the company overpay for "doomed businesses that will ultimately only deepen the company's losses."
The short-seller notes the recent share price surge and feels the company's valuation made little sense even before retail investors chased recent "buzzy headlines on potential marijuana rescheduling, which may be a boon for U.S. weed companies but does next to nothing for Tilray."
As a result, Kerrisdale believes TLRY's shares are now even more poorly positioned.