What happened

Shares of Canadian marijuana company Sundial Growers (NASDAQ:SNDL) were down more than 7% at Monday's lows, and were 3.6% below Friday's closing price as of 2:15 p.m. EST. 

At that time, the stock was trading at $1.50 per share, right at the exercise price of new warrants the company just announced it was issuing. 

So what

On Friday, Sundial announced that more than 98 million warrants to purchase common shares at prices of $0.80 and $1.10 per share were being exercised, and the company was issuing the same number of new warrants at the $1.50 exercise price. 

The exercised warrants brought gross proceeds of $89.1 million to the company. The newly issued warrants could bring it another $147.5 million. 

marijuana flower bud in front of Canadian flag

Image source: Getty Images.

Now what

The proceeds from the exercised warrants mark the third capital raise this month for Sundial. Shares are currently up more than 20% in February, but are still down 50% from the month's highs on Feb. 10. 

The company's net cannabis revenue dropped 36% sequentially in the third quarter, which ended Sept. 30. Its adjusted EBITDA loss increased by 13% in that same period. 

Some of the raised money is going toward a strategic investment Sundial announced last week. It took an 18.5% stake in Canadian edibles producer Indiva with 22 million in Canadian dollars. Using freshly raised capital to invest in the business could be good for shareholders, but the continued flurry of dilutive offerings could also be worrisome for the still-unprofitable company.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.