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Why Sundial Growers Stock Soared Today

By Joe Tenebruso - Feb 1, 2021 at 1:42PM

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A WallStreetBets-fueled short-squeeze attempt could boost the marijuana company's odds of survival.

What happened

Shares of Sundial Growers (SNDL 5.41%) soared on Monday. As of 2 p.m. EST, the cannabis company's stock price was up more than 45%.

So what

Sundial's share price has doubled in recent days after it drew attention from traders on the WallStreetBets group on Reddit, which now has nearly 8 million members. Like other stocks the group has targeted, Sundial is heavily shorted. So, it's likely that some traders bought shares in hopes of igniting a short squeeze that would help to drive Sundial's price higher. 

Dollar bills are cut into the shape of a cannabis leaf.

Image source: Getty Images.

Sundial took advantage of the boost to its stock price to raise some much-needed capital. On Friday, the cannabis company announced that it expected to raise roughly $100 million via the sale of common stock and warrants. Sundial said it intends to use the cash for general corporate purposes, as well as possible acquisitions. 

Now what

Following the stock and warrant offering, Sundial will be on far stronger financial footing. So, although traders seeking quick profits are no doubt contributing to the stock's gains Monday, some investors might also be wagering that this cash infusion could allow the company to survive long enough to profit from the long-term growth of the cannabis market.

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