Why Shares of Cannabis Producer Tilray Have Gotten Very, Very High—and Why Investors Think They Could Crash

The stock of cannabis producer Tilray skyrocketed Wednesday, after the founder’s appearance on Jim Cramer’s Mad Money and news of a U.S. clinical trial. How high? Very, very high.

Tilray’s stock briefly touched $ 300 yesterday, with its market cap at $ 14.4 billion. Trading had to be halted five times throughout the day because it was so volatile. The company had announced Tuesday it got the green light from the Drug Enforcement Agency to import medical marijuana for testing in California, and CEO Brendan Kennedy told Jim Cramer he thought his company could be worth $ 100 billion some day.

Tilray started trading on the Nasdaq in July, becoming the first cannabis producer to complete an IPO on a U.S. stock exchange, raising $ 153 million at $ 17 per share. In the last six months, the company reported sales of $ 17 million, and losses of $ 18 million.

The three founders of cannabis investment fund Privateer Holdings, which has a 76% stake in Tilray, are now billionaires. Is this a sustainable upswing or just reefer madness?

Dan McCrum called Tilray “wildly overhyped” in the Financial Times. “Any attempt to sell all the shares, or even to dump large amounts of them, we suspect, would cause the valuation to collapse,” he wrote. Short seller Citron Research called the stock’s surge “beyond comprehension.”

Bloomberg compared the frenzy to last year’s cryptocurrency rallies. “Crypto traders I know are getting into pot stocks,” said Jeffrey Van de Leemput, founder of investing-education platform Cryptocampus. “But I don’t know if that’s a pattern or just coincidence.”

Seattle-based Privateer has investments in other cannabis-related companies as well: Leafly, Marley Natural and The Goodship. Peter Thiel’s Founders Fund became the first institutional cannabis investor through Privateer’s $ 75 million Series B financing round in 2014, Bloomberg said.

It’s not the only public marijuana company, but the pool is small. Canada’s Cronos Group is also on the Nasdaq, and Canopy Growth, of which Corona beer parent Constellation Brands is an investor, is listed on the New York Stock Exchange and worth $ 12 billion. Coca-Cola was said to be interested in a cannabis soft drink, spirits giant Diageo is talking with Canadian producers and scientists have brewed beer with marijuana.

But as marijuana is going mainstream—64% of Americans support legalizing it—the future for cannabis companies remains hazy.

Canada has legalized recreational marijuana use, with sales to start Oct. 17, but it is still illegal under U.S. federal law, despite California, Colorado and Washington and other states loosening restrictions. Weed entrepreneurs from the Great White North are likely to face scrutiny from border agents if they visit the United States.