GMP Securities Pro Talks Tilray's Volatility

Canadian cannabis company Tilray Inc TLRY experienced a wild Wednesday trading session, which is clearly not a positive for the relatively investment new sector, according to Steve Ottaway.

The Pro

Ottaway, managing director at GMP Securities, discussed Tilray and cannabis stocks during CNBC's "Squawk Box" segment Thursday morning.

The Thesis

Tilray shares surged nearly 100 percent intraday Wednesday to hit an all-time high of $300 before closing the day at $214.06. Naturally, the extremely volatility "spooks" institutional investors at a time when a shift is underway from illegal cannabis sales to legal sales, Ottaway said.

The U.S. is likely a $70-billion market that needs to be converted, Ottaway said, but questioned if Tilray can be worth a $20-billion market cap if there is no apparent pathway toward full legalization in the U.S.

Recreational cannabis will become legal in Canada Oct. 17, and the world is watching the country's "experiment" in legalization, he said. Meanwhile, the medicinal market for cannabis is more accepted globally, and if Canada's shift to full legalization is successful, then other countries can follow suit and easily legalize, regulate and tax recreational cannabis, Ottaway said. 

In the meantime, the only option available for global cannabis investors to watch Canada's "fascinating" experiment and hope its success makes it merely a "question of timing and administration" for a similar move in the much larger U.S. market, he said. 

Price Action

Tilray shares were up 6.4 percent at $227.79 at the time of publication Thursday. 

Related Links:

The Options Market Suggests Tilray's Huge Gains Might Not Last Long

The Home Grow Cannabis Market Could Grow Quickly As Adult Use Expands

Photo courtesy of Tilray.