So far, October has been an overall good month for the stocks of companies in the cannabis field, specifically for those based in Canada. Both Aurora Cannabis (NASDAQ:ACB) and Cronos Group (NASDAQ:CRON) have spent the week in the green, up 7.93% and 0.91%, respectively. Furthermore, they have both seen shares shoot up this morning. Some of the most impressive gains from the sector this morning, though, came from Sundial Growers (NASDAQ:SNDL). The gains came after an announcement that the company would be acquiring Canadian liquor and cannabis retailer Alcanna (OTCMKTS:LQSIF), sending SNDL stock shooting up.
What’s Happening With SNDL Stock
Less than an hour into the trading day, SNDL stock is up by nearly 7%. While this is a slight decline from where it was when markets opened, this growth is still significant. News of an acquisition can often send a stock shooting up at the start of a day only to have it experience a slight downtick.
The news of the Alcanna acquisition comes at an opportune time for Sundial Growers, after coming off of a difficult month in which shares declined by more than 5%. October is off to a better start, though, with SNDL stock up by almost 4% over the past five days.
The impending deal has also been good news for Alcanna stock, which spent the past week flatlining at around $6.30. As of this writing, it is up 8.53% for the day.
What It Means
For some context, pending no further complications, the acquisition will be an all-stock deal and include a total consideration of roughly $346 million. It is expected to close in December of 2021.
The decision to acquire Alcanna certainly makes sense for Sundial Growers. The company’s reach within Canada’s retail sector is impressive, and although it’s primarily known for dealing in liquor and spirit sales, it holds a 63% equity interest in Nova Cannabis (OTCMKTS:NVACF). One of Canada’s largest fine cannabis retailers, Nova operates 62 stores throughout Alberta, Saskatchewan and Ontario. Its stock has also soared at the news of this deal, rising 622% for the day. Nova has had a better season than Sundial, rising 48.52% for the month and 11% for the week.
In a statement issued by the company, Sundial CEO Zach George stated that “Alcanna’s value-focused model in liquor retailing has created market stability and we believe that the replication of this playbook in cannabis has strong potential to drive a similar result.”
Why It Matters
This type of strategic partnership will allow Sundial to expand its reach even further and gain a market share in retail cannabis as the market continues to expand across Canada.
The finalization of the deal will likely send shares shooting up even more, making now the opportune time to buy. InvestorPlace‘s Joseph Nograles recently advised investors to buy SNDL stock now before the next turnaround, citing the impressive ways in which the company has restructured and come out stronger, despite a turbulent year. As he states,
“SNDL stock remains a highly speculative play, not for the faint of heart. The cannabis industry, especially in Canada, is undergoing a tumultuous period. Sundial has been a victim of this turmoil in the past having gone through restructuring in 2020.
But Sundial has emerged as a stronger company. The company’s two-pillar strategy of cannabis operations and investments seems very promising. Speculative investors should consider SNDL stock.”
For any investors looking for a bullish play on cannabis, SNDL stock is definitely worth watching as this acquisition moves into its final stages.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.