The U.S. cannabis market is the largest and most promising one in the entire industry. It has so much potential that Canada-based cannabis producers such as Canopy Growth and Tilray Brands (TLRY 1.71%) have been looking for ways to penetrate the U.S. market even before it's legal to do so. The federal ban on pot in the U.S. prevents Canadian companies from entering the U.S. pot market while also trading on a top exchange such as the Nasdaq.

In Tilray's case, the company previously acquired a majority position in the convertible notes of multi-state operator (MSO) MedMen Enterprises. The convertible debt would have given Tilray a way to own a stake in the business at a later date, presumably when the U.S. legalizes marijuana. That day hasn't come, and even if it does, it may not matter. Today, MedMen has a market cap of just $150,000 and its shares are listed at $0.

MedMen has been laying off staff amid financial struggles

Last month, MJBizDaily reported that MedMen was announcing layoffs, including at its corporate office, involving accounting and marketing departments. The layoffs caught many employees by surprise and also came as company CEO Ellen Deutsch Harrison resigned. Michael Serruya, the executive chairman of the company's board, has also stepped down.

The company has been behind on its quarterly filings. In its most recently filed report, which was for the period ending March 25, 2023, MedMen's revenue totaled $27.2 million and was down 23% year over year. The company's operating loss of $23.9 million was also deeper than the $20.1 million loss MedMen incurred a year earlier.

Even more perilous is its balance sheet: The company reported cash and cash equivalents of just $7.6 million, with $474.3 million in current liabilities.

A painful lesson for Tilray investors

The MSO, which was once seen as a key part of Tilray's long-term strategy to enter the U.S. market, has failed to live up to expectations. While the company hasn't gone under, the odds of a turnaround look to be slim to none, given its financial woes.

Over the past three years, shares of Tilray Brands have plummeted more than 90% as investors have grown frustrated with the company's lack of progress. It was less than three years ago that Tilray CEO Irwin Simon mapped out a strategy for the company to achieve $4 billion in revenue by 2024. In addition to dominating the Canadian pot market, the strategy assumed a strong position in Europe and for Tilray to acquire or merge with cannabis businesses in the U.S. once legalization occurred. Presumably, that would have involved MedMen Enterprises.

Tilray has since pulled that rosy forecast, as it has no hope of meeting it. In the trailing 12 months, the company's revenue has totaled just $700 million. And during that period, the company has incurred a net loss of more than $1.4 billion.

Tilray Brands is a highly risky pot stock to avoid

Although for contrarian investors, there may be a temptation to take a chance on Tilray's stock, given its more modest $1.4 billion valuation, there's still plenty of room for the stock to fall lower. The company is generating growth due to acquisitions, but its fundamentals still look atrocious.

Until Tilray can drastically improve its bottom line, this will remain a highly risky, speculative investment. The stock normally does rise in value when there is optimism that the U.S. may legalize marijuana, but the long-term trajectory has been negative. There's good reason for that, as Tilray often relies on acquisitions for growth, and that's not going to fix its problems.

There are plenty of better, more promising stocks to invest in for the long haul that won't put your portfolio at significant risk.