Sundial (NASDAQ:SNDL) stock is retreating 6% in early trading after the company announced that its board had approved a reverse stock split. Based in Calgary, Canada, Sundial grows and sells cannabis products.

SNDL Stock and the Reverse Stock Split

At Sundial’s annual meeting, held yesterday, the owners of SNDL stock approved a reverse split. Specifically, the shareholders agreed to allow the company to exchange one share of its stock for every 10 to 25 of its shares outstanding. Since reverse splits tremendously reduce the number of shares outstanding, the price of each share increases by large amounts in the wake of such a transaction.

Sundial’s board decided late yesterday afternoon to carry out a 1-for-10 reverse stock split, causing the company’s share price to jump by about 820% today. However, adjusted for the split, it’s dropping about 14%.

As InvestorPlace Assistant News Writer Eddie Pan noted in his July 21 article: “Sundial has stated that it is pursuing a reverse split in order to regain compliance with Nasdaq’s $1 minimum bid price requirement.”

Other Developments

At the meeting, the company’s shareholders also approved an initiative changing its name to Sundial Inc. from Sundial Growers Inc. The firm also announced that all five of its board members, including its chairman, Greg Mills, had been re-elected to the panel. Each board member received 79%-89% of the shares voted, Sundial reported.

The U.S. Senate may soon consider a bill that would legalize cannabis, as one of its committees discussed such legislation last week. Recently, three important Democratic senators introduced a cannabis legalization bill titled The Cannabis Administration and Opportunity Act.

An Analyst Upgraded SDNL Stock in May

BMO Capital’s Tamy Chen raised her rating on Sundial to “market perform” from “underperform” on May 10. Chen noted that the gross margin of the company’s production unit had increased, and she called that development “encouraging.”

On the date of publication, Larry Ramer did not hold (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.