Shares of Sundial Growers (SNDL 1.72%) rocketed higher on Monday after the marijuana producer announced it was now debt-free. As of 2:25 p.m. EST, Sundial's stock price was up more than 20%.
Sundial prepaid the remaining 21.9 million Canadian dollars in principal on its credit facility. In doing so, the cannabis grower no longer has any outstanding debt, unlike many of its rivals. "While many cannabis companies have significant debt burdens, Sundial is proud to announce that we are now debt-free," CEO Zach George said in a press release.
It's a noteworthy feat for a company that was in such dire financial straits earlier in the year. "In February 2020, the global pandemic was just emerging, Sundial was running out of cash just two quarters after its IPO, and we were in breach of covenants under the terms of our senior secured credit facility," George said. "Through a combination of asset sales, debt for equity swaps, capital raises, and cash repayments, we have eliminated $227 million in debt this year."
Sundial has roughly CA$62 million in cash reserves on its now pristine balance sheet. Additionally, its debt repayments will save it CA$3.6 million in annual interest expense. Both of these factors could help to make Sundial a more attractive acquisition target for larger cannabis companies.
Sundial has reportedly been seeking a deal, and it said on Monday that prepaying its credit facility removed all restrictions on its "ability to pursue strategic opportunities."