Pre-market investors are busy with Sundial Growers (NASDAQ:SNDL), pushing up the shares more than 4% at 7:30 a.m. Eastern. The action follows the announcement that Sundial has teamed with SAF Opportunities to form a 50/50 joint venture to focus on cannabis-related verticals, seeking both Canadian and international opportunities and investments.
What could have investors particularly interested is that the SunStream JV could include a Canadian special purpose acquisition company (SPAC). First, SunStream must pursue its initial mandate to create a special opportunities fund with commitments from third-party limited partners. Sundial is also making an initial commitment of $100 million. However, after that initial mandate, a Sundial Growers SPAC is on the list as an option.
“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,” said Sundial CEO Zach George. “We look forward to working together to generate attractive returns for our stakeholders through broader capital deployment opportunities in the global cannabis market.”
SNDL Stock Watchers Wait for Wednesday Earnings
The announcement precedes Sundial’s fourth-quarter earnings report, scheduled for March 17 along with full-year operating results. Watch for the numbers on the cannabis company’s retail sales, as well as indications that quarterly losses are shrinking.
The report should also give some sense of just how many shares of SNDL stock are actually out in the world after dilution concerns put pressure on the share price. Recent registered offerings, market-priced capital raises and debt-to-equity swaps have investors wondering, particularly after some 98.3 million warrants were exercised last month.
The company’s early February registered offering provided a cash pile that puts it in position to make big moves in a consolidating sector.
Analysts Just Gave Sundial a Big Boost
The move comes just days after InvestorPlace contributor Will Ashworth wrote that “the stars need to align for SNDL stock to hit $4, but it’s not impossible.”
Also earlier this month, Cantor Fitzgerald initiated coverage of the Canadian cannabis company with a “neutral” rating. Analyst Pablo Zuanic set a 12-month price target of $1.15 on SNDL stock. “Even though fundamentals have remained mixed, with an ongoing market-share loss according to the latest scanner data, and despite a 3Q20 reported net sales decline of 36% seq (-54% YoY), the run-up in the share price enabled the company to raise equity and convert warrants and debt,” Zuanic wrote in a note to clients.
As well, the Reddit retail trading mob targeted SNDL stock. Pot stocks in general have performed well so far this year, on the heels of increased U.S. marijuana legalization odds. But, with its penny stock status and popularity among Reddit investors, Canada-based Sundial has seen some of the most dramatic price moves.
It wasn’t one of the first stocks to benefit from the meme stock madness kicking off in late January. But, in the first few trading days in February, retail investors went into a frenzy, sending shares up nearly four-fold. As the dust settled, the stock fell to prices between $1 and $1.50 per share.
Today’s announcement is certainly a sign of progress on Sundial’s transformation to brand owner from flower provider. Still priced in penny-stock territory, it could prove to be a compelling cannabis play in the months ahead.
On the date of publication, Robert Lakin did not have (either directly or indirectly) any positions in the securities mentioned in this article.
InvestorPlace contributor Robert Lakin is a veteran financial writer and editor, following fintech, agtech and property tech startups.