Tilray Shares Slide as Regulatory Milestone Triggers Profit-Taking

The recent historic shift in U.S. federal cannabis policy has resulted in a counterintuitive market reaction for Tilray Brands. Instead of fueling a continued rally, the long-anticipated reclassification of cannabis from Schedule I to Schedule III has prompted a significant sell-off in the company's stock, illustrating a classic market adage in action.

The week saw rapid developments. Following the executive order from President Trump initiating the rescheduling process, Tilray Brands announced the formation of "Tilray Medical USA" on December 18. Irwin D. Simon, the company's CEO, framed the federal policy shift as an essential evolution, stating it paves the way for economic progress and enhanced medical care access.

Market Psychology Takes Over

The trading pattern has been a textbook example of "buy the rumor, sell the news." In the days leading up to the official announcement, speculative buying propelled Tilray's share price upward by approximately 75% in just one week. However, the confirmation of the news abruptly reversed sentiment.

After moving into negative territory on the day of the announcement, the equity extended its decline on December 19, falling a further 9.6% to close near $11.15. Trading volume was substantially above average, highlighting heightened investor anxiety. The sell-off was sector-wide, with peers like Canopy Growth also registering double-digit losses. This suggests the positive reform aspects—including potential tax benefits and improved banking access—were already largely factored into valuations.

Should investors sell immediately? Or is it worth buying Tilray?

Operational Progress Amidst the Volatility

Beyond the share price turbulence, Tilray's operational fundamentals show improvement. For the first quarter of its fiscal year 2026, the company reported a net profit of $1.5 million, marking a return to profitability after years of losses. This compares to a net loss of $34.7 million for the same period last year. Quarterly revenue reached $210 million.

The company's strategy now extends beyond cannabis. Through strategic acquisitions, Tilray has diversified and established itself as the fourth-largest craft beer brewer in the United States. Furthermore, in early December, the company executed a 1-for-10 reverse stock split. This move was designed to reduce the number of outstanding shares and increase the stock's appeal to institutional investors.

The Road Ahead

Attention now turns to the upcoming quarterly results in early 2026 and the specific implementation details of the new U.S. regulations. Analysts at TD Cowen have maintained their buy rating on the stock with a $10 price target, despite acknowledging its elevated valuation. A key factor for future performance will be the speed at which the newly launched Tilray Medical USA division can contribute to the company's bottom line.