On Feb. 8, Sundial Growers (NASDAQ:SNDL) stock announced that Nasdaq gave it a 180-day extension for SNDL stock to regain compliance with the exchange’s minimum bid price requirement. 

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Since then, its shares went sideways over the next six weeks. You would think that would have calmed investors — not one bit. 

Now it faces a second deadline on March 30. If it doesn’t get the ball across the line and completes its acquisition of Alcanna (OTCMKTS:LQSIF) by March 30, regardless of whether the parties agree to another extension, SNDL is a deadstock walking. 

Here’s why. 

It Won’t Matter If SNDL Stock Does Reverse Split

Whether Sundial trades at 50 cents, $5, or $50, investors won’t give a lick that it complies with Nasdaq. Sure, some institutions might be able to buy at $50 that couldn’t buy at 50 cents, but it won’t be enough to stop SNDL stock from falling to mere pennies. 

In my last article in February, I noted that Alcanna is vital to Sundial’s coast-to-coast Canadian cannabis retail ambitions. 

“By combining Sundial’s Spiritleaf retail stores with Nova’s, the merged entity will own more than 180 cannabis retail stores across Canada, along with 171 liquor stores. In addition, the liquor stores will generate the profits necessary to continue growing the ‘downstream’ segment of Sundial’s cannabis operations,” I wrote on Feb. 25. 

“The segment’s annualized revenues will be almost 1 billion CAD ($784.0 million) and it will be Canada’s largest cannabis retailer operating in six Canadian provinces.”

While the cannabis side of its retail operations will grow into their own, Alcanna’s liquor business provides profits today that will attract new investors to Sundial. As of the end of September 2021, Alcanna’s liquor operations accounted for 79% of its overall revenue in the quarter and all of its profits. 

Alcanna’s Operating Segments – Nine Months Ended Sep. 30, 2021

Alcanna’s liquor business through the first nine months of fiscal 2021 had an operating profit that was 35% of its cannabis revenues. Together with Spiritleaf, it would have a legitimate one-two punch. The liquor business’s profits would be enough to get a merged entity into the black in 2022.

That’s a big deal. Investors are tired of ridiculous multiples for money-losing companies. If it doesn’t get the deal done, a significant attraction for regular investors goes out the window. 

As The Motley Fool’s David Jagielski recently said about Sundial, the company reports its fourth-quarter 2021 earnings on March 29, the day before the deadline with Alcanna. So we’ll know then if the deal will still happen or not. 

In the meantime, there’s not much for investors to do but twiddle their thumbs. 

Sundial Could Be an Attractive Acquisition

The consolidation in the cannabis industry continues to accelerate. As a result, larger businesses will continue to be taken out as business plans falter and cash disappears. Unfortunately, Sundial could be one of those businesses. 

In the third quarter, Spiritleaf’s system-wide sales were 47.1 million CAD ($37.2 million), a record for the retail network. As of Nov. 9, 2021, it had 109 stores open across Canada. Between July and September 2021, it opened 14 stores. But, of course, any time you can put together 100 stores, your economies of scale gain traction. 

Not having Alcanna means it would take longer to build a profitable business. It’s not impossible, but certainly a lot more difficult. 

Without Alcanna in the fold, Sundial becomes vulnerable to a buyout at an unattractive valuation relative to its share price in 2019. That would be a bitter pill to swallow for early investors. 

But without Alcanna, how much would a strategic or private equity buyer pay for its cannabis and financial assets? Unfortunately, I couldn’t hazard a guess. At the moment, it has a market capitalization of just less than $1 billion. 

The Bottom Line

If Alcanna fails to close, my guess is that SNDL shares drop in half overnight. Maybe a buyer offers 30 cents a share at that point for the entire business. 

In my view, that’s a steal, given the potential of both segments of its business. But when you’re drowning, sometimes you have to take a lifeline. 

Mark your calendar for March 29. Good or bad, it’s going to be a day to remember.

On the date of publication, Will Ashworth 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.