Tilray Brands Has Been Buying Bitcoin. Could It Help the Stock Surge Higher?

Tilray Brands (NASDAQ: TLRY) has struggled to get its stock price up and attract growth investors in recent years. Although it has diversified into alcohol, many investors see this as primarily a cannabis company. And there's usually not much excitement unless there's talk of possible marijuana reform or legalization in the U.S.

Recently, Tilray has looked at another way to potentially appeal to investors, and that's through crypto. On the company's financials, it now has a position in digital assets. While it's not huge, it's something to watch, as Tilray may get busier in adding to its holdings in the future.

With other stocks benefiting from Bitcoin's rising valuation simply by loading up on the asset, could investing in crypto be a good move for Tilray Brands?

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Tilray had 9.16 units of Bitcoin as of the end of August

On Tilray Brands' most recent earnings report, which was for the period ended Aug. 31, there was a line on its balance sheet for digital assets. It totaled just under $1 million, and it had been zero just three months earlier. These digital assets pertain to its Bitcoin holdings. Tilray reported having 9.16 units of Bitcoin as of the end of the period.

Tilray's management said on its recent earnings call that it invested in Bitcoin recently and that it's also considering holding other cryptocurrencies in the future, including Ethereum and Solana. Accepting Bitcoin is also going to be possible on its websites, as Tilray recognizes that many of its users also hold Bitcoin.

Is investing in Bitcoin a good move for Tilray Brands?

Loading up on Bitcoin can be good for a business under a couple of conditions. The company needs to have sufficient cash flow to cover its day-to-day operations and to fund its growth. Then, with any remaining money, it can potentially divert that to other investments, such as crypto.

But whether it's crypto or anything else, whatever the company chooses to invest in needs to be relatively safe. If the business needs that money in the future to deploy in its growth strategy, only to find that the investment has fallen significantly in value, that would be a big problem. Investing heavily in Bitcoin, which has been volatile in the past, could lead to more risk for this company.

Right now, Tilray Brands has a fairly nominal position in crypto. According to bitcointreasuries.net, there are 100 companies that have over 100 Bitcoins in their portfolios, with Strategy leading the way at more than 640,000. For Tilray to really be a big player in crypto, it would drastically need to ramp up its investments.

Unfortunately, Tilray's financials aren't all that strong to begin with, so it doesn't have a lot of room to take a meaningful position in crypto. The company spent $1.3 million over the course of its most recent quarter just to fund its day-to-day operating activities. While that was an improvement from the $35.3 million it burned through a year ago, Tilray doesn't look to be in a strong enough financial position to where it can realistically afford to spend a lot of money on Bitcoin purchases, without adversely impacting its growth.

Investing in Bitcoin doesn't make Tilray a safer or better buy

If Tilray's stock jumps in value, it'll likely be due to news around marijuana reform or legalization, not because crypto enthusiasts have suddenly become bullish on the company's portfolio of Bitcoins. More companies are getting involved in holding digital assets these days in the hopes that doing so will not only result in future gains from the asset but also attract investors who are bullish on crypto; a small position such as Tilray's may not garner much attention.

Tilray buying Bitcoin recently isn't a significant move that makes the cannabis stock a better buy, but it is something worth keeping an eye on in future earnings reports, to see if it becomes a bigger part of its strategy. The danger is that it could add risk to a stock that's already been a risky buy in recent years -- it's down more than 70% in five years.

For now, I still think avoiding Tilray entirely is the safest option for investors as it has struggled to generate growth and it remains unprofitable. Even if it does get more deeply into crypto, that may just add to its overall risk.

David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and Solana. The Motley Fool recommends Tilray Brands. The Motley Fool has a disclosure policy.