It's been nearly 10 months since the roller-coaster ride began for Tilray (TLRY) investors.

The bigger they are...

On July 19, following a list price of $17, which saw Tilray raise more than $170 million, the "Legend of Tilray" was born. This highly popular medical cannabis brand was expected to be a clear-cut rival to the early dominance of Canopy Growth and Aurora Cannabis, with the capital it was raising from its initial public offering on the Nasdaq expected to provide a means to greatly expand its production capacity, as well as push into foreign markets.

An up-close view of a flowering cannabis plant in sunlight.

Image source: Getty Images.

Be it some combination of the company's low initial float -- private-equity firm Privateer Holdings owns more than three-quarters of Tilray's outstanding shares -- or the high expectations surrounding its early success on the medical cannabis side of the equation, Tilray's stock was pumped from its $17 list price to an intraday peak of $300 in less than two months.

The future looked bright for what had briefly become the largest marijuana stock in the world by market cap. Tilray had approximately 850,000 square feet of devoted cultivation space throughout three grow sites in Canada, and it would go on to add 250,000 square feet in Europe, bolstering its cultivation capacity to about 1.1 million square feet. Assuming Tilray produced cannabis at the rough industry average of 100 grams per square foot, it should have no issue becoming one of Canada's major growers.

...the harder they fall

However, the wheels fell off the wagon almost as quickly as Tilray zoomed out of the gate. Tilray would give back two-thirds of its gains not long after its momentum-driven rally, and it would cede substantial market value following an abysmal fourth-quarter report in March.

A visibly frustrated stock investor grasping his head as he looks at losses on his computer monitor.

Image source: Getty Images.

Mind you, most marijuana stocks haven't exactly been impressing Wall Street with their most recent quarterly results. For Tilray, its $15.5 million in fourth-quarter sales, a year-on-year tripling in revenue, and the fact that 49% of full-year sales were tied to high-margin extracts sat just fine with Wall Street. It was the company's anemic 20% gross margin in the fourth quarter, coupled with operating losses of $22.9 million in Q4 and $57.7 million for the full year, that failed to spark investors.

But the bigger story was CEO Brendan Kennedy's announcement that Tilray no longer viewed the Canadian market as its top priority. Categorizing the Canadian landscape as pricey, Kennedy noted that Tilray's focus would be on the United States and Europe going forward. While the peak potential of the U.S. and EU are higher than Canada, it's an odd strategy shift so early in the legalization process in Canada.

Tilray finally announces capacity expansion, but investors aren't that impressed

On Wednesday, May 8, we were privy to the next chapter in Tilray's ongoing saga. Prior to the opening bell, Tilray announced that it would spend $32.6 million to increase the company's aggregate production and processing capacity by 203,000 square feet to around 1.3 million square feet.

Potted cannabis plants growing under special lighting in an indoor facility.

Image source: Getty Images.

As detailed in the company's press release, the biggest jump in production capacity will come from High Park Gardens in Leamington, Ontario. Though High Park has a 662,000-square-foot facility, only 155,000 square feet are operational and licensed. Part of the $32.6 million will go toward adding 127,000 square feet of additional production capacity. Similarly, Tilray's Nanaimo, British Columbia, campus will see its footprint grow by 33% to 80,000 square feet from 60,000 square feet.

On the processing side of the equation, Tilray will be doubling the size of its High Park processing facility in London, Ontario, to 112,000 square feet from 56,000 square feet. 

While this probably sounds great, it's really a bit of a head-scratcher. You see, Tilray's S-1 prospectus in June 2018 noted that it had 3.8 million square feet of global development potential, including close to 3.6 million square feet of cultivation space, but has, as of now, deployed just a small percentage of that capability. This is especially apparent in Leamington, where a mere 282,000 square feet of cultivation space will be put to work on a 4.4-million-square-foot parcel of land. 

Tilray leaves investors guessing in all the wrong ways

The fact is that when Tilray came to market in July 2018, it had a clearly defined plan, freshly raised capital, and plenty of land at its disposal to bolster its production and processing capabilities. But between June 2018 and May 2019, Wall Street and investors heard virtually nothing from the company on the progression of its cultivation and processing sites in Canada. All the while, Tilray's larger peers continued to make complementary acquisitions or bolstered their production capacity or portfolio breadth organically. Today, Tilray finds itself miles behind Aurora Cannabis, Canopy Growth, and about a half dozen other producers in peak output potential.

A visibly confused young man in a suit scratching the top of his head.

Image source: Getty Images.

The announcement this week to bolster production capacity by 147,000 square feet really raises more questions about the company's future than it answers. Yes, it does push the production needle in the right direction, but as one of the five most cash-rich pot stocks, why not substantially bolster Canadian or EU production capacity? Even if the intent is to export, sitting on undeveloped land makes little sense when more than 40 countries globally have given the green light to medical cannabis.

At the same time, Tilray's investment within Canada is puzzling after saying that it would focus its future investments on the United States and Europe. Yes, it does have plenty of undeveloped land that would be a waste not to put to work, but the company just told us less than two months ago that the U.S. and Europe are its focus, and yet, here it is, spending $32.6 million on Canadian production and processing.

Frankly, management looks a bit confused as to what to do next, and the company's previously clear growth strategy now looks murky, at best. With losses expected to continue through at least 2020, the company is looking as avoidable as ever for investors.