What happened
Shares of Sundial Growers (SNDL 10.11%) popped on Monday after the marijuana producer said it would create a joint venture with SAF Group. As of 1:50 p.m. EDT, Sundial's stock's price was up more than 10%.
So what
The two companies will work together to build SunStream Bancorp. The joint venture will focus on making cannabis-related debt and equity investments in Canada and international markets. Sundial and SAF Group will each own half of SunStream.
Sundial Growers wants to become a major investor in the rapidly expanding cannabis industry. Image source: Getty Images.
SunStream will create a special opportunities fund that will accept contributions from third-party investors, along with $100 million in initial funding from Sundial. SunStream also intends to create a Canadian special purpose acquisition company (SPAC) in the future.
"Following early success with our internal capital investment program, we are pleased to announce this new partnership with SAF, as we continue to identify innovative ways to deliver on our commitment to shareholder value creation," Sundial CEO Zach George said in a press release. "SunStream will enable Sundial to remain focused on our core operations, while leveraging the strength of SAF's private equity and credit investment expertise on a global scale."
Now what
Sundial has raised hundreds of millions of dollars in recent months via a series of share and warrant offerings. These stock sales have diluted its shareholders' ownership stakes, but they've also given the cannabis producer a lot of cash to invest.
Ultimately, the long-term performance of Sundial's stock will be determined by its ability to generate strong returns on its shareholders' capital. For today at least, investors appear to be signaling their approval of how Sundial's leadership team is deploying their cash.
