Many cannabis stocks soared in 2018 when Canada legalized recreational marijuana. But few had as wild a ride as Tilray (NASDAQ:TLRY), which rocketed up by more than 800% in just a six-week span beginning in August of that year. The shine wore off, however, after legalization became official in October 2018 and investors realized it wasn't a direct line to riches for Tilray. 

While shares are still almost 90% off those September 2018 highs, they've tripled thus far in 2021. And there's a good reason for investors to be talking about the company again: It's getting closer to the shareholder vote needed to approve its merger with fellow Canadian pot grower Aphria (NASDAQ:APHA)

marijuana buds with glasses of beer

Image source: Getty Images.

Looking beyond Canada

Tilray has already been working to expand its business on its own. Last month, the company announced a new distribution agreement with U.K. medical cannabis distributor Grow Pharma. Under the agreement, Tilray's pharmaceutical-grade medical cannabis will be imported and distributed by Grow Pharma in the U.K. "Regulations are progressing as more and more countries across Europe are recognizing the benefits of medical cannabis," Tilray Europe's managing director, Sascha Mielcarek, said in a statement.

Separately, the company announced it has exported its first medical cannabis shipment to Spain, and has received the first and only market authorization for medical cannabis products in Portugal.

The merger with Aphria could also help it move into the U.S. should federal legalization occur. That's far from a certainty, but Aphria has been making plans to take advantage of the potential. It acquired U.S.-based SweetWater Brewing last year for $300 million, giving it a distribution framework if marijuana achieves federal legalization in the U.S. (SweetWater sells the most popular hemp-flavored beer in the country.) In the announcement of the purchase, Aphria said it provides "a platform and infrastructure [for] access [to] the U.S. market more quickly in the event of federal legalization."

Merger timeline

Special meetings of Tilray and Aphria shareholders will occur two days apart in mid-April for voting on the proposed merger. If all is approved, the combined company will adopt the Tilray name, and the management teams have said they expect to generate approximately $78 million per year in cost savings. 

Regarding potential growth in the U.S., Aphria CEO Irwin Simon, who will lead the combined company, issued a statement saying that the new Tilray will "continue to pursue [mergers and acquisitions] in the U.S.," intending to grow both company's product brands, and expand offerings that can complement each other.

marijuana flower buds in jars at dispensary

Image source: Getty Images.

The road to profitability

Though it's an exciting time for investors in Tilray and Aphria, they should realize that profitability is still unlikely anytime soon. In its most recently released quarterly results, Aphria reported net revenue that was up 33% over the prior-year period, and growing cash from operating activities improved cash flow sequentially. Though the company showed a positive income figure through accounting adjustments, the true net loss grew against the prior-year quarter. For its full-year 2020, Tilray also continued to show a net loss, though it was an improvement over 2019. Revenue increased 26% for the year. 

Both companies are moving in the right direction, and the pending merger has investors talking about these stocks again. But they should remain a speculative portion of one's portfolio, as global legalization will likely be a long process, and the new Tilray's business prospects will follow suit. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.