Tilray's valuation has gone insane

Marijuana company Tilray, which IPO'd in July at $17 per share, had a truly wild stock-market ride on Wednesday, one day after announcing that it's being allowed to import marijuana from Canada into the U.S. for clinical trials.

Why it matters: Tilray is the only pure-play marijuana company traded in New York (the others are all in Toronto), and has become a speculative vehicle, with a valuation divorced from any conceivable reality.

The big picture: Tilray currently has a market capitalization in the $20 billion range, although it's anybody's guess where it will trade today, or tomorrow. It has $54 million of assets, $17 million in negative free cashflow, and its main product is a highly-taxed commodity with ultra-thin margins and chronic oversupply.

Still, it's a day-trader's delight. On Tuesday, Tilray closed at $155 per share. On Wednesday, it rose as high as $300 per share, before falling by $37 per share within two minutes.

That was enough to get Tilray halted for extreme volatility. When it reopened, it immediately fell another $37, bounced around, got halted again, fell further, got halted a third time, and fell even more — to a low of $151 per share — before rallying by $66 in four minutes to close at $218, up about 40% on the day.

• Total volume was just shy of $7 billion, with more than 31 million shares trading hands. (The free float, or number of shares available to trade, is less than 18 million shares.)

Be smart: The wisdom of crowds does not apply to cannabis company market capitalizations. What you're seeing here is something between a bubble and a random number generator. Touch these stocks only if you love to gamble.

• Go deeper: Pro Rata podcast interview with Tilray's CEO