Tilray Shares Face Pressure Amid Regulatory Shift and Reverse Stock Split

Tilray Brands, Inc. saw its shares come under significant selling pressure this week following the execution of a 1-for-10 reverse stock split. The technical maneuver, intended to maintain the company’s Nasdaq listing by boosting its share price, appears to have backfired in the short term, with the stock declining approximately 10% since the split took effect on December 2. Investor sentiment was further dampened by a new regulatory development in the United States that threatens a key area of future growth.

U.S. Legislative Change Closes Hemp Loophole

Beyond the market’s typical negative reaction to reverse splits, a substantial fundamental concern emerged from Washington. In November, the U.S. Congress passed legislation that significantly tightens the federal definition of legal hemp. The new rules will limit legal products to those containing a maximum of 0.4 milligrams of THC per container, effectively closing the loophole created by the 2018 Farm Bill.

That earlier legislation had allowed a thriving market for hemp-derived THC beverages and edibles to develop. While this segment currently represents only a minor portion of Tilray’s overall revenue, the strategic setback is considerable. The law, expected to take effect in about one year, dismantles a major growth narrative for the company’s expansion ambitions in the lucrative U.S. market.

Analyst Adjusts Outlook in Response to Challenges

The combined impact of these events has forced a reassessment among market observers. TD Cowen analyst Robert Moskow drastically reduced his price target for Tilray from $25 to $10 on a split-adjusted basis. He maintained a “Buy” rating for now, citing heightened competition in Tilray’s core Canadian cannabis market and challenges in its diversification strategy.

The company’s move into the craft beer segment is facing headwinds as alcohol consumption in the U.S. hits a multi-year low. These factors contributed to the analyst’s more cautious valuation.

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

Core Cannabis Operations Show Resilience

Despite the negative market reaction and regulatory hurdles, Tilray’s fundamental cannabis business demonstrated resilience in its latest quarterly report. For the first quarter of fiscal 2026, revenue from the cannabis segment increased 5% year-over-year to $64.5 million.

Growth was driven by a 12% rise in Canadian adult-use cannabis sales and a 10% gain in international medical cannabis revenue. The company also reported strengthening its market position in Germany through new product launches.

Investor Perspective Remains Cautious

For investors, the landscape is complex. The company’s core operations continue to grow at a moderate pace, but the regulatory clampdown in the United States has severely dampened market enthusiasm. With comprehensive federal legalization in the U.S. still not on the horizon and the new hemp restrictions looming, catalysts for a sustained positive trend appear scarce in the near term.

The reverse stock split, a procedural action to comply with Nasdaq’s minimum bid price requirement, has ultimately been overshadowed by these more substantive regulatory and competitive challenges.