Please ensure Javascript is enabled for purposes of website accessibility

Why Sundial Growers Stock Plunged and Then Rebounded Today

By Joe Tenebruso - Feb 19, 2021 at 5:45PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The popular cannabis stock had a volatile day of trading.

What happened 

Shares of Sundial Growers (SNDL 5.41%) fell on Friday morning after the marijuana producer announced warrant exercises and a new issuance. Sundial's stock rallied later in the day; by the close of trading, its price was up 5.5% after falling as much as 15.9%. 

So what

Holders of roughly 98.3 million warrants will convert them into shares at prices of $0.80 and $1.10. Sundial, in turn, will receive $89.1 million in cash. In exchange, Sundial is issuing an additional 98.3 million warrants, which will give these holders the right to purchase shares at an exercise price of $1.50 over a 42-month period.

A person is pointing to a digital stock chart that rises, then falls, and then rises again.

Sundial Growers' stock ended Friday on an upswing. Image source: Getty Images.

The new warrant issuance comes on the heels of Sundial's filing of a shelf registration with the U.S. Securities and Exchange Commission (SEC) on Tuesday, which will allow it to issue as much as $1 billion in new securities. The marijuana company exhausted its previous registration statement after a series of stock offerings earlier in the year. 

Now what

When Sundial's shares declined sharply on Friday morning, investors appeared to be focusing on the potential for their ownership stakes to be diluted by additional stock and warrant sales in the weeks and months ahead. But while dilution is a serious concern, the long-term direction of Sundial's stock price ultimately depends on whether it can use its new-found cash to make value-creating acquisitions and fund profitable organic growth initiatives.

Sundial has raised hundreds of millions of dollars in recent months, which management has said it could use to acquire other cannabis companies.  Sundial recently took a $22 million stake in Indiva, a Canadian producer of cannabis edibles. 

Investors seemed to take a more optimistic view of Sundial's marijuana-focused investment opportunities later in the day, helping its stock price rebound.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Sundial Growers Inc. Stock Quote
Sundial Growers Inc.
SNDL
$0.39 (5.41%) $0.02

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.