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Marijuana stocks had a short strange trip this week. Led by Tilray, the U.S.-listed grower that just went public in July, the shares of Canada’s pot producers skyrocketed by Wednesday, then gave most of their gains back. Tilray opened the week at $117, for example, hit $300 Wednesday afternoon, and by Friday it had closed all the way back at $123.

Comparisons between marijuana stocks and the Bitcoin bubble are apt.

Canada’s licensed marijuana producers begin recreational sales on Oct. 17 and they have acres of greenhouses in bloom. But their stock prices have been weakly tethered to business fundamentals for months now, and last week’s blow-off was all the proof needed that the trading has become irrational. At Wednesday’s height, Tilray was valued at $30 billion. That’s more than Twitter, CBS, and American Airlines. From a Dec. 2017 peak above $19,000, Bitcoin’s price has toppled to $6,700 leaving many enthusiasts in tears. Expect the same of Tilray.

It’s also hard to understand why Tilray is valued above larger, more established rivals like Aurora Cannabis and Canopy Growth. For you stock analysts out there, Tilray’s enterprise value on Wednesday surpassed 85-times bullish estimates for its 2020-year sales and 340-times that year’s estimated cash flows.

Canadian weed stocks were already overvalued when Barron’s examined them in a March cover story. But they started getting manic in August when U.S. liquor giant Constellation Brands agreed to add $4 billion to its investment in Canadian weed producer Canopy Growth. Aurora shares jumped 17% on Monday, after Bloomberg reported the company was talking to Coca-Cola about spiking sports drinks with cannabidiol, a soothing but non-psychoactive ingredient of marijuana. Aurora cautioned that it had “no agreement, understanding or arrangement” with any beverage company yet. Then, on Tuesday evening, CNBC’s Jim Cramer hosted Tilray chief executive Brendan Kennedy, who said the marijuana industry would spawn multiple $100 billion companies. Hysteria ensued Wednesday as 31 million shares changed hands and the stock doubled from the prior day close—only to plummet again.

Kennedy, who wouldn’t talk to Barron’s, also heads the Seattle venture fund, Privateer Holdings. The firm, backed by billionaire investor Peter Thiel, spent about $40 million for what is now 82% of Tilray shares. At 2:45 p.m. Wednesday, that stake was worth more than $20 billion — a 500-fold increase in value.

While Tilray was spiking, shares of the industry’s real leader Canopy Growth didn’t keep pace. That baffles Canopy chief Bruce Linton. “It seems like each time we do something, it’s good for the sector’s stocks,” Linton tells Barron’s.

Good news for Canopy shouldn’t necessarily bode well for its rivals, Linton warns. Along with Constellation’s backing, Canopy has more than a third of all outstanding purchase orders in Canada, as well as substantial market share abroad. “Our objective is to dominate the sector and to do the best globally,” he says. “That will not be good for all the other companies. When I see the valuations being attributed to places that have virtually no production, virtually no off-take agreements, which don’t operate in multiple countries and have a very limited scientific research team...”

Reefer Madness Valuations On Wednesday, weed stocks went to wild multiples of production and their replacement costs. Sources: Bloomberg; company filings

What’s really sent Tilray shares into space has been their scarcity, as American investors rush to board the weed train. Only about 10% of Tilray shares became free-trading in July’s IPO, and that small float has made Tilray stock hard to buy, borrow, or sell short. More than 100% of the Tilray float has been changing hands each day, since Canopy’s August deal with Constellation, and it’s pretty clear that U.S. retail investors are responsible. Several other cannabis companies are dual-listed in Canada and the U.S–including Canopy, Cronos Group, Green Thumb Industries and MedMen Enterprises–and the majority of their daily trading volume has shifted to the U.S. in the last month. That must be why Canada’s other big producers are reportedly beating a path to American exchanges. Both Aurora and Aphria ditched their U.S. subsidiaries this year, because operating in a country where marijuana remains illegal under federal law was an impediment to listing on the NYSE or Nasdaq. So U.S. investors will soon have other weed stocks to sample.

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Tilray and its insiders will also surely oblige the hunger for Tilray stock by selling more. The company would be crazy not to take advantage of its handsome valuation by doing a follow-on offering. We asked Tilray if it had such plans. It declined to comment. Meanwhile, Kennedy and his Privateer partners are sitting on a several thousand percent unrealized gain. Some 66 million insider shares are locked up until mid-January 2019, unless underwriter Cowen & Co. releases them. One incentive for Cowen to release the lock up is its own gain on about 170,000 shares it bought in a financing round before Tilray’s IPO: a gain worth more than $30 million to Cowen.

But apart from the manifest demand of spirited retail investors, it’s hard to see why an investor would buy Tilray stock at these levels. The company compares poorly with its large rivals. Per gram sold, Tilray has the highest cost-of-goods among large producers. And while Canada’s other licensed producers ramp up inventories, ahead of October’s legalization, Tilray’s production and inventory both declined in the latest quarter. International revenues, in the quarter, were all of $345,000.

At week’s end, Tilray enjoyed a market value of $11.5 billion, but investors aren’t getting much for their money.

Write to Bill Alpert at william.alpert@barrons.com