Any Pot luck for Sundial Growers (NASDAQ: SNDL) After Massive Cash Pile Deployment?

Sundial Growers (NASDAQ: SNDL) cites “challenging industry conditions” as a prime reason its sales have dropped down. The investors who have been looking for capitalization on cannabis legalization, Sundial doesn’t appear to be a very healthy option right now even though its price remains >4x higher since November last year. Sundial Growers is up 13.00% and closed at $ 1.13 on Wednesday. As SNDL pivots towards investment in the cannabis sector, it seems more focused on positioning a massive cash pile. 

Few investments made by Sundial Growers

As of now, SNDL has made the following investments-

  • $59 million invested in SPV, which has Zenabis senior debt. HEXO later acquired the company. 
  • $22 million invested in Indiva. This small Canadian LP has SNDL 19% ownership on an as-converted basis. 
  • The announced takeover of Inner Spirit, a Canadian cannabis retailer, in a deal worth $131 million.
  • Announced SunStream, which is a joint venture with SAF, the Canadian investment firm for cannabis-related opportunities.

SunStream 50-50 JV: An interesting turn of events

The formation of a 50-50 joint venture with SAF is the most interesting investment here. Sundial announced here that JV is expecting to take external capital with $188 million seed funding from it to launch the fund. In simple terms, Sundial shall be funding SAF for kicking off private equity fund which only focuses on cannabis investments. The strategy is of special interest to investors seeing it as a volatile opportunity that carries its shares of costs and risks. Several questions linger mid-air, but at this point, it is difficult to evaluate Sundial Growers because of its past failures. 

So far, the company has divulged $1.1 billion cash amass with no debt on the balance sheet. It is the Canada-based LP whose major revenue is sourced from cannabis sale. The company has also reported a $3.3 million negative EBIDTA. The negative gross margin of Sundial Growers is certainly not indicating positive earnings.

Leave a Comment

Your email address will not be published.