Not too long ago, cannabis specialist Sundial Growers (NASDAQ:SNDL) faced the very real prospect of a delisting from the Nasdaq exchange. With SNDL stock consistently trading below the critical $1 mark, the clock was ticking on the security, which has lost 94% of its value since the close of its first session as a publicly traded company.
As one of the major U.S. exchanges, the Nasdaq has a reputation to protect. Understandably, it doesn’t want a bunch of junk equities on its books, so to speak. However, the exchange just granted Sundial a 180-day extension to get back above the pivotal threshold, pushing the compliance date from Feb. 7 to Aug. 8.
Ordinarily, I don’t like to bring up the idea of catching falling knives. Sure, you want to buy when others are fearful and all that jazz. But the problem with deploying such hackneyed adages is that there’s no guarantee that the asset in question won’t keep dropping. Indeed, those who bought the dips in SNDL stock since February 2021 have continued to see lower and lower valuations.
At the same time, I am well aware of the powerful nature of mass psychology, especially toward meme stocks (or stocks with meme-ish qualities). Thus, in late January of this year, I mentioned that — if only as a self-fulfilling prophecy — SNDL stock could jump to and breach the $1 level.
To be clear, it didn’t get there — not even close. However, if you had bought shares at the time my article was published, you would be looking at a nice little profit.
SNDL Stock and the Crypto Lesson
Looking forward, I’m not sure what to make of SNDL stock in terms of the delisting possibility. As analysts have pointed out, Sundial has some options to maintain compliance, such as share buybacks or a reverse stock split.
But if you’ve been following meme-trading culture — which also encompasses cryptocurrencies — you’ve got to ask an alarmingly ironic question: What’s so wrong about SNDL stock being delisted and getting sent to the over-the-counter market. After all, the OTC market is a decentralized platform.
That’s right — the OTC market is a decentralized market, one where trades occur directly between two parties and don’t involve a central exchange or broker. I mean, aren’t decentralized protocols and applications what everybody’s going nuts for these days?
If you take magic blockchain words seriously, you’d be led to believe that decentralization fosters democratization, as well as cures racism, sexism and maybe even cancer. So then why is Sundial’s management team so desperate to avoid the prospect of individual traders basically making their own market for SNDL stock.
Turns out, centralization isn’t the big, bad wolf that so many folks make it out to be. Like any concept, both centralization and decentralization have their pros and cons. But, on balance, it seems to me that people prefer centralization.
The Bottom Line on SNDL Stock
At the end of the day, it comes down to fostering a sense of stability and security. With centralization, it’s easier to establish trust. For instance, the Nasdaq has established a set of (centralized) rules and requirements; thus, each stock listed there has a base modicum of substantiveness.
On the other hand, the OTC market is a free-for-all. Maybe a security traded there is the next big thing. Or maybe it’s junk, like arguably most of the OTC’s offerings. And that’s surely part of the reason why Sundial wants to keep its Nasdaq listing. Staying on an actual exchange gives the company an air of respectability.
As for SNDL stock specifically, you might want to reconsider exposure to the cannabis play. This might be a tough market, especially if consumer inflation left unchecked results in consumers pivoting to the black market for their botanical needs.
Even if you have no interest in Sundial whatsoever, don’t ignore the free lesson it’s giving you. Decentralization, while it has its benefits, also features many negatives. Never buy anything just because of its distribution of control.
On the date of publication, Josh Enomoto 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.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.