Just when you thought it was time to write off pot stocks following a miserable fourth quarter, they've come roaring back in a big way. Year to date, through Jan. 30, the Horizons Marijuana Life Sciences ETF, a cannabis basket fund with around four dozen securities, has gained 42%! That's blazing hot.

Tilray appears to have plenty of positive catalysts

But not every marijuana stock has participated equally. Canadian grower Tilray (NASDAQ:TLRY), the second-largest publicly traded pot stock in the world by market cap, has only gained about 10% since the year began, and it's lost roughly three-quarters of its value since its super-spike to $300 a share in mid-September.

An up-close view of a flowering cannabis plant with a dark background.

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On the surface, many things look to be going right for Tilray. Most notably, it landed two brand-name partnerships in December. First, it announced that it'd be working with Novartis' generic drug subsidiary Sandoz to globally distribute noncombustible cannabis products. Shortly thereafter, Tilray formed a $100 million joint venture with Anheuser-Busch InBev that'll see the duo putting $50 million each toward researching and developing cannabis-infused beverages.

Beyond these deals, Tilray has also done a solid job of expanding into international markets, as well as branding its medical cannabis products. As one of the first growers to be licensed by Health Canada, Tilray has had a head start on most of its competition. Assuming the company utilizes close to 3 million square feet in land at its disposal, it could easily become a top-five cannabis producer in Canada.

Ultimately, this is a company that's respected on Wall Street and is one of the few marijuana stocks to be listed on a reputable U.S. exchange. It's also the only pot stock to go the initial public offering route on a major U.S. exchange.

A half-empty hourglass on a table next to a calendar.

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The lock-up expiration takes the wind out of Tilray's sails

So why has there been little love of late for Tilray, you ask? The answer lies with the company's Jan. 15 lock-up expiration.

Following an IPO or reverse takeover, publicly traded companies typically have a 90- or 180-day lock-up period whereby insiders and pre-IPO stakeholders are barred from selling their shares. This is to ensure that a company doesn't go public just so insiders can reap the rewards of an initial pop and leave unsuspecting retail investors holding the bag, so to speak. After the company listed its shares at $17 on July 18 and debuted on the Nasdaq the following day, Jan. 15 marked the end of the 180-day period during which insiders weren't able to sell.

Interestingly enough, private-equity fund Privateer Holdings, which has close to an 80% stake in Tilray, announced prior to the Jan. 15 lock-up expiration that it wasn't planning to sell any of its shares until at least the second half of 2019. With only around 10% of the company's total outstanding shares therefore at risk of being sold on Jan. 15, it was believed that this announcement would calm investors' nerves. It didn't work. Shares of Tilray tanked 17% on the day of its lock-up expiration, and they've been meandering lower ever since.

A businessman in a suit pressing the "sell" button on a digital screen.

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Tilray's CEO just dumped $11 million worth of stock

Most shareholders probably figured the worst was over once Jan. 15 passed. Then, last week, two Tilray insiders sold stock on Jan. 24, as was revealed via a filing with the Securities and Exchange Commission. Brendan Kennedy, the CEO of Tilray, disposed of 149,916 shares at an average sale price of $74.21 for $11.1 million in proceeds. Meanwhile, chief revenue officer Woody Pastorius sold 20,578 shares at the same average sales price, netting $1.5 million. 

What's particularly notable about this sale is that Kennedy is also the executive chairman of Privateer Holdings, the primary holder of Tilray's stock and the fund that said it wouldn't dispose of a single share until at least the second half of the year. Having Kennedy back such a move from Privateer then sell $11.1 million worth of stock could certainly be viewed by shareholders as a disappointing development, even though it represents only a small fraction of all outstanding shares.

However, this disposition of shares by Kennedy and Pastorius is a bit more innocuous than most folks might realize. The sale was tied to a portion of restricted stock units (RSU) that vested. The company, as part of this RSU vesting plan, sold shares on Kennedy's (and Pastorius') behalf to cover IRS withholding taxes. This means the shares themselves weren't sold for personal gain.

Generally speaking, it's not uncommon to see executives disposing of stock or executing options in January or February to help cover their upcoming personal tax obligations. Since a majority of wealth for these individuals is tied up in stock holdings and options rather than salary, selling a portion of their holdings can help cover most or all of their federal income tax bill. 

A magnifying glass being held over a balance sheet.

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Now this I'd worry about

But if you want something to genuinely worry about, it's Tilray's bottom line. With marijuana now legal in Canada, attention has pivoted from promises to tangible results for marijuana stocks. And while Tilray is certain to deliver strong sales growth, its bottom line is leaving a lot to be desired.

As a result of the company's IPO and a convertible senior note offering, it has ample cash to put to work in terms of capacity expansion, product portfolio diversification, branding, marketing, medical cannabis research and development, and acquisitions. The issue is that all of these core strategies are going to require a lot of capital through 2020, which could make it nearly impossible for Tilray to deliver a profit, even with higher sales.

As a reminder, this is a company that generated just $10 million in third-quarter sales, albeit this was a prelegalization quarter. Meanwhile, Tilray's operating loss through the first three quarters of 2018 totaled $34.7 million. Even if post-lock-up selling from Privateer does come into play in the second half of 2019, the real concern is Tilray's bottom line and Wall Street's forecast for continued losses. Until we see genuine bottom-line improvement, Tilray remains a pot stock that investors should avoid. 

Editor's Note: This story has been updated to accurately reflect that the sale of Tilray's stock was done for tax purposes and not for personal gain. 

Sean Williams has no position in any of the stocks mentioned. The Motley Fool recommends Anheuser-Busch InBev NV and Nasdaq. The Motley Fool has a disclosure policy.