If you think the Canadian legal marijuana industry has been booming, you haven't seen anything yet. With the Senate and House of Commons decisively passing bill C-45, best known as the Cannabis Act, adult-use marijuana will be legal by Oct. 17, according to Prime Minister Justin Trudeau. Though medical marijuana sales have been strong, the bulk of the sales growth in Canada is expected to come from recreational use.

What exactly are we talking about in terms of sales, you ask? How about an additional $5 billion annually on top of what pot stocks are already generating from medical weed sales and via exports. These lofty estimates have coerced investors to pile into marijuana stocks, and encouraged growers to expand their production as quickly as their balance sheets would permit.

A person holding cannabis leaves in their cupped hands.

Image source: Getty Images.

Canadian pot stocks are moving to reputable U.S. exchanges

Another interesting side effect of rising marijuana stock valuations is the push toward legitimacy. Once relegated to the pink sheets or the over-the-counter (OTC) exchange, two Canadian cannabis growers have now listed their shares on reputable U.S. exchanges.

In late February, Cronos Group (CRON) became the first marijuana company to uplist from the OTC exchange to Nasdaq. Aside from the prestige of being listed on a more reputable exchange, moving to Nasdaq was designed to allow institutional investors to take part in the legal cannabis movement. By improving liquidity, the assumption was that steadier investment from Wall Street firms would follow.

Not too long thereafter, in May, Canopy Growth Corporation (CGC 0.77%), the largest publicly traded pot stock by market cap, became the first to list on the history-rich New York Stock Exchange. Canopy Growth would likely have beaten Cronos Group to the punch of listing on a reputable U.S. exchange had its potential uplisting not been delayed by a 9.9% equity-stake investment from Corona beer maker Constellation Brands that was announced in late October of last year.

A television studio inside the Nasdaq exchange, with monitors bearing tickers prices in the background.

Image source: Nasdaq.

This medical cannabis giant just filed for an IPO

Now, yet another Canadian marijuana stock is looking to move into the limelight: Tilray.

However, there's something different this time around. Unlike Cronos Group and Canopy Growth, which are publicly traded in Canada and the U.S., Tilray isn't a publicly traded company at the moment. Rather than uplisting, Tilray is filing for an initial public offering, and bypassing its domestic Canadian market in the process.

According to its S-1 prospectus filing from June 20, it plans to offer its shares on Nasdaq under the ticker symbol TLRY, albeit there's no idea exactly when that offering will occur. Similarly, though the prospectus suggests the offering could be valued at up to $100 million, this figure tends to be fluid when initially announced in a prospectus. 

So, what would investors in Tilray be getting if they purchased shares? To start with, Tilray was one of the very first growers granted a medical cannabis cultivation license by Health Canada. While we're not exactly talking about an old market, Tilray does have more experience as a licensed medical cannabis grower than most other growers throughout Canada.

A tipped over prescription bottle filled with trimmed cannabis buds lying on a doctor's prescription pad.

Image source: Getty Images.

It's also a company that's able to export its medical cannabis to as many as 11 countries spanning five continents. Keep in mind that while most folks are focused on Canada's recreational legalization, there are more than two dozen countries around the globe that have legalized medical weed in some broad capacity. Many of these countries have nascent or nonexistent pot-growing industries, and are therefore reliant on companies like Cronos Group, Canopy Growth, and Tilray, to name a few, to supply their dried cannabis and/or oil and extract needs.

Tilray plans to use the proceeds of its IPO to expand its cultivation capacity, as well as to repay or pay down nearly $9.3 million in debt, according to its S-1 filing. 

Mixed feelings on Tilray's IPO

Understandably, no decision on whether Tilray is a good or bad deal for investors can be made as of yet, because we don't even know the size of the offering, or when the company will officially list its shares. But what I can say is that I have mixed feelings about this IPO.

On the plus side, Tilray says it has "tens of thousands of patients" spanning the countries it serves. Though recreational cannabis is all the rage, investors might be overlooking the healthy margins that medical-pot patients provide. Tilray has an established history of providing wholesale medical cannabis, as well as selling its cannabis online or over the phone. Its production differentiation, along with its soon-to-be-healthier cash position following its IPO, should put this company in good shape to add to its already impressive portfolio of medical cannabis products.

A magnifying glass being held over a balance sheet.

Image source: Getty Images.

On the downside, Tilray has yet to show any bottom-line improvement. Despite 62% year-over-year sales growth in 2017 to $20.5 million, the company's operating loss widened slightly to $7.5 million. And its net loss, including foreign exchange losses/gains and interest expenses, declined by a meager 1% from the previous year. It could be a while before Tilray is delivering in the earnings column for investors. 

And there's the gray area, which for me is the company's desired focus on Canadian recreational marijuana. Don't get me wrong: I fully understand why Tilray wants to boost production in order to take advantage of the euphoria associated with legalization in Canada. But what I'm not sold on yet is its ability to carve out a niche in the adult-use market as it's done in the medical cannabis market. I'd much rather it double down on production for medical weed patients and focus on exports.

Likewise, it's unclear if Tilray will be able to compete against some of the larger players in the recreational marijuana industry given its late start to capacity expansion. Chances are that it'll miss out on a number of lucrative long-term supply deals that surface just after the onset of legal cannabis sales. This just means it'll have to potentially work harder to find buyers for its cannabis.

All in all, it's an intriguing offering that I'd suggest eyeing closely. If management decides to stick to its roots and doesn't venture too far from what it does best -- i.e., serving the medical weed community with its differentiated products -- then this could become a stock worth digging into down the road.