Still in its early stages, the cannabis industry sometimes does business in nontraditional ways. A prime example is Tilray (NASDAQ:TLRY), which on Friday essentially acquired and swallowed up its major shareholder.

Tilray announced that it had completed a merger with private equity firm Privateer Holdings, which held 75 million shares, or roughly 77% of its stock. All Privateer stock is to be converted "into the right to receive the applicable portion of an aggregate [share]" of the cannabis company's stock. Tilray stressed that it did not pay any cash consideration to Privateer in the arrangement.

Two hands holding marijuana leaves.

Image source: Getty Images.

This move was originally announced in June, just after the two companies signed a letter of intent on the lock-up period for Privateer investors to sell their Tilray stock. As per the terms of that agreement, Privateer investors owning the newly issued Tilray stock from the merger will be subject to certain limitations to its sale.  

In the first year after the close of the merger, such investors will only be able to divest shares in deals arranged by Tilray. Starting in the second year, 50% of the stock newly issued in the merger will be released for sale, in equal amounts over the course of the year's four quarters.

A lock-up period is a legally mandated term during which insiders are prohibited from selling their stock in companies that have had an initial public offering (IPO) on the stock market. Tilray was the first pure-play marijuana stock to have an IPO on a U.S. exchange (the Nasdaq) back in July 2018.

The idea that Privateer -- then as now the company's major shareholder -- would flood the market with its shares once the original lock-up period expired was a major worry with Tilray stock. In January, Privateer pledged it would sell no shares following the expiration of the lock-up period. Several months later, the rather byzantine merger was unveiled by Tilray.

In the press release trumpeting the closing of the merger, the company said "[w]e believe this transaction will give Tilray greater control and operating flexibility, while allowing us to effectively manage our public float."

As this move was announced several months ago and basically went as expected, it did not have a major impact on Tilray stock. The shares closed down by less than 2% on Friday.