What happened

Shares of the Canadian pot-giant Sundial Growers (SNDL -2.05%) jumped by as much as 35% in pre-market trading Friday morning. What's behind this hefty surge in the company's share price today?

After the closing bell Thursday afternoon, Sundial released its 2021 third-quarter earnings report. While the company posted net earnings of $11.3 million in Canadian dollars for the three-month period, this positive financial development doesn't appear to be what's truly moving the stock this morning. 

A scientist inspecting a cannabis sativa plant.

Image source: Getty Images.

So what

Instead, investors seem to be bidding up Sundial's shares today in response to the company's decision to approve a share-repurchase program. Specifically, Sundial said in a separate announcement from its Q3 earnings report that its Board of Directors has approved a new share-repurchase program that authorizes the company to repurchase up to $100 million Canadian dollars of its outstanding common shares from time to time at prevailing market prices.

What's the big deal? Sundial, like most publicly traded Canadian pot companies, has a long track record of diluting its shareholders in order to raise capital.

Turning to the specifics, Sundial's outstanding share count has risen by a jaw-dropping 2,150% since the company went public a little over two years ago. Although this monstrous level of shareholder dilution is a key reason why Sundial ended the most recent quarter with CA$571 million in unrestricted cash and no outstanding debt, it's also the main culprit behind the company's sub-$1 share price. 

Now what

What's important to understand is that Sundial has to get its share price above the $1 threshold to continue to be listed on the Nasdaq stock exchange. This share-repurchase program ought to go a long way toward achieving this all-important goal. After all, this move should assuage the market's deep concerns about the company's penchant for diluting shareholders, as well as the near-term threat of a possible reverse split.

Sundial, in effect, definitely made a smart move with this shareholder-repurchase program. As such, it wouldn't be surprising if the pot company's stock continued to plow higher in the weeks and months ahead.