What happened
Highly watched Canadian cannabis company Sundial Growers (SNDL +2.33%) reported earnings after the bell last night. Investors hoping for any big positive development were unimpressed, and after dropping 10% early on Friday, Sundial shares are still down more than 7% as of 12:50 p.m. EDT today.
So what
Sundial spent much of last year restructuring by raising capital and reorganizing into a two-pillar business heavily reliant on acquisitions. In doing so, the company diluted existing shareholders by increasing its share count by more than 1 billion shares, or almost 1,500%, from a year ago.
Yesterday's financial update didn't provide the momentum shareholders were looking for. In fact, Sundial said its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at a loss in the second quarter, which ended June 30. That comes after it reported its first positive quarter ever for that metric in the first quarter of 2021.
Image source: Getty Images.
Now what
Net loss for the second quarter was the equivalent of about $41 million. CEO Zach George issued a statement saying: "Our second quarter performance continued to be impacted by the liquidation of discounted inventory and our refusal to push sub-optimal product into the market. We have undertaken a significant retrenchment in our cultivation activities."
Investors would have liked a second consecutive quarter of positive adjusted EBITDA, and that likely contributed to today's reaction in the stock. Sundial said it has more than $1 billion of cash, marketable securities, and long-term investments as of June 30. Investors will be closely watching that cash to see if it can make successful investments to turn the business around.
