Global Stock Market

Why Sundial Growers Stock Wilted Today

What happened

Shares of Sundial Growers (NASDAQ:SNDL) had tumbled 12.8% as of 12:45 p.m. EDT Monday after the Calgary-based cannabis company filed a share sale prospectus with the SEC this morning.

So what

In the prospectus, Sundial described plans to conduct an “equity distribution” whereby it would create up to $800 million worth of new common stock and sell it “from time to time through … our sales agents.”

Sundial described how its shares have “experienced extreme volatility,” ranging in price from as low as $0.14 per share to as high as $2.95 per share over the past year, despite there being “no recent change in our financial condition or results of operations.”  

Image source: Getty Images.

Now what

Why Sundial felt it necessary to describe this volatility as part of its sales prospectus is unclear, but logically, the disclosure might serve two purposes. First, it might explain why Sundial is not proposing to sell its shares at any specific price (because the price wobbles so much). Second, it might imply an intention by management to take advantage of these price zooms by refraining from selling shares when its share price seems too low — but pouncing on price spikes to sell shares when they are more popular.

That would explain the “from time to time” language.

It would also, I suspect, be the best thing for shareholders, helping Sundial to raise the greatest amount of cash while inflicting the least amount of stock dilution upon its shareholders.

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.

Related posts

These 2 Stock Market Plays Are Moving Up the Charts in 2021


Here’s why Wall Street and investors aren’t giddy enough, says top strategist


10 Best Dividend Stocks For 2021


Leave a Comment