Please ensure Javascript is enabled for purposes of website accessibility

Why Sundial Growers Stock Dropped Monday

By Howard Smith - Feb 22, 2021 at 2:55PM

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 pot grower is planning to raise more capital.

What happened

Shares of Canadian marijuana company Sundial Growers (SNDL -5.89%) 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.

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.
$0.41 (-5.89%) $0.03

*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 service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/18/2022.

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.