The German government clearly objected to claims by Tilray in an environment where the big public North American pot companies are coming under scrutiny for continuing questionable behavior
After Tilray issued a press release last week bragging about its lobbying influence with the German government as it considers recreational reform that was also published unquestioningly by Bloomberg, Benzinga, Business Insider, and Yahoo (for starters) German officials have taken the highly unusual step of correcting the facts. No matter how “sexy” Tilray may have claimed to be in the process of influencing German recreational reform, Deutsch authorities have unequivocally and very publicly said “nein.”
Namely, the German government stated directly to Marijuana Business Daily that Tilray had overstated its claims of being key influencers in the discussion over recreational reform by holding a “roundtable” with German regulators that would “kick off draft legislation” to implement recreational use.
Genug ist Genug
This is almost unprecedented in the development of the market, although it has clearly been coming for some time as the German government begins to realize how short-sighted its initial welcome to the Canadian industry (over even the nascent German one) has been to date.
However, it is not the only time the German government has shown itself to be a bit more suspect of the shenanigans of the industry to inflate its influence and individual company worth – and at least short term stock prices.
What is new is the very public and official denial of cannabis company claims.
It is coming of course at a very strategic time. Starting with the fact that American cannabis giant Curaleaf just bought 55% of a German distributor for a price many have questioned openly.
Germans, starting with the government, are clearly aware of the general financial instability of the industry to date – and further the reasons for it.
A Smart Understanding of Political Association
Tilray is, if nothing else, a slick cannabis operator. The company has consistently pioneered efforts to put itself in the headlines and associate itself with reform – in large part to help drive its stock price north. While it is not the only company to do such things (far from it), Tilray has played the game far smarter, and for longer, than any of the other large public cannabis companies.
In part, this is a testament to a very savvy understanding of politics, which in some cases clearly shows that the company has been operating with a very good understanding of positioning itself along the same. See the German cultivation tender bid, which the company initially signaled it would be participating in, but by the summer of 2017, had changed course for Portugal. The company then waited until Aphria admitted it was in serious trouble before merging with the “other” Canadian-owned German cultivation license holder earlier this year, positioning itself better than any other of the bid winners in its ability to create an easily expandable supply chain from global sources.
However, there have been other instances where such behavior was, if not illegal, then highly questionable for a number of reasons. See Canada in 2018 when Tilray timed its IPO to run between July 9, 2018, and July 23. The original date for the start of the Canadian recreational market was initially set to begin on July 1 – although later pushed back six months until the fall of that year.
The move also comes after Tilray successfully got a shareholder lawsuit against the firm dismissed in New York last year after being sued by investors claiming that the company had fraudulently overstated the value of a marketing and revenue-sharing agreement in the US.
The fact that this looks suspiciously like another engineered effort to pump the stock price when the company (like other large public companies including Canopy Growth) announced unprecedented write-downs and losses earlier this year, is just part of this.
Beyond anything else, German regulators have been very much concerned about the financial games that many of these companies are undoubtedly playing to keep their brand value high – at least for the short-term stock investor. See the contretemps at the Deutsche Börse (which I write about in my book about the German cultivation bid).
At least in terms of financial regulators in Frankfurt, the entire industry was put under probation – from which it has never fully emerged.
Not The First Time at the Woodshed
Tilray has also attracted the ire, if not legal problems in Germany before. This starts with the close association of Leafly with the producer, causing as many predicted, the closure of Leafly Germany online which shut down operations in 2020.
Beyond this, the company has run into trouble with German regulators about advertising.
However, this is far from “just” a Tilray problem. The entire Canadian if not North American vertical has gotten a significant black eye here, no matter the fact that three Canadian firms won the cultivation bid here for problems stemming from production standards and pricing to GMP.
The German government may be moving towards recreational reform, and Germans may have changed their attitude towards cannabis – significantly and in a short period of time – however, what has gone on in other markets is clearly not going to be tolerated here.
The “cannabis industry” certainly from North America is beginning to learn that Germany, beyond any other country in Europe, is very different. And further, that the standards set here have a wide, global influence on overall industry development.