Shares of Canadian cannabis producer Tilray (TLRY) - Get Report  soared on Monday after announcing a deal with its majority shareholder, Privateer Holdings, to gradually sell the fund's remaining stake in Tilray over the next two years.

Tilray will acquire Privateer in a so-called downstream merger -- a merger in which a partially owned subsidiary takes over its parent company, in this case Privateer. The deal will allow some 75 million of Tilray shares to be released in an "orderly" fashion over the next two years.

Privateer is a cannabis-focused private equity holding company that formed Tilray in 2013. It opened up its stake in Tilray to outside investors in a private financing round last February, ahead of its July 2018 initial public offering. Peter Thiel is an investor in Privateer.

In the first year following the transaction, shares will be sold to institutional and strategic investors, which Tilray will determine. Remaining shares will be released over the second year at a staggered rate, the companies said. All told, Privateer Holdings holds 77% of Tilray's outstanding shares.

Short-sellers had been betting that Tilray and its majority shareholder wouldn't reach a deal to float its shares to the public. January 15 was a pivotal date for the company, as it marked the end of Tilray's post-IPO lockup period -- and the lifting of Privateer's restriction to cash out.

Seattle-based Privateer is backed by PayPal Holdings (PYPL) - Get Report founder and Facebook (FB) - Get Report  investor Thiel, and counts Tilray founder and CEO Brendan Kennedy as executive chairman.

Shares of Tilray were up more than 11% at $43.20 in mid-morning trading on Monday.

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