- NASDAQ: SNDL has dropped by 15% in early trade on Tuesday.
- Sundial Growers Inc is a retail favourite but risk-off across most assets hurting.
- SNDL has been on a strong run in 2021 so profit-taking understandable.
Update February 25: Sundial Growers Inc (NASDAQ: SNDL) shares have closed Wednesday's session with a rise of 15% to $1.45. While US ten-year Treasury yields have also risen to 1.45% – making stocks theoretically less attractive – there is room for more rises. Shares of the Calgary-based cannabis firm are set to extend their gains and move up some 11.72% to $1.61 according to Thursday's premarket data. Jerome Powell, Chairman of the Federal Reserve, has dismissed inflation concerns and seems keen to continue printing dollars and keeping rates low. That is music to investors' ears.
Too much of a good thing – a firm that raises capital is a double-edged sword. On the one hand, the new cash may support an expansion and allow the firm to weather any storms. On the other hand, the need to raise money is also considered a sign of weakness – and dilutes those holding the bag.
Sundial Growers Inc (NASDAQ: SNDL) is suffering from its announcement of selling 98 warrants to purchase common shares at low prices – $0.80 to $1.10, below the current level. Another round of warrant selling is set to be exercised at $1.50, above current prices.
The most recent exercise is worth some $89.1 million while the new move could rake in some $147.5. As mentioned, investors are focusing on the low price rather than the extra cash.
SNDL Stock Price
NASDAQ: SNDL has been on a losing streak since hitting a high of $3.96 and closing near $3 during last week. On Monday's equity of the Calgary-based company fell to $1.43, beyond the second warrant issuance exercise price.
According to Tuesday's premarket data, another fall is on the cards, by some 11% to $1.27. Significant support awaits at $1.04 low, which was the lowest close this month. Resistance awaits at $1.50.
SNDL Stock Forecast
Sundial Growers is a cannabis company and prospects for the sector are brightening – full Democratic control in Washington allows the left-leaning party to work toward legalization – or at least decriminalization of marijuana. Moreover, upbeat economic forecast and upcoming stimulus checks could also flow toward weed consumption.
On the other hand, the vast American market is still plagued by the underground selling of cannabis and is prone to legal issues in many states.
A new area for Sundial to expand into is edibles via its acquisition of Indiva . The fellow Canadian company would allow for more growth in the growing subcategory. Moreover, it also allows shows that SNDL investors now see that the newly raised cash is going into growth.
Previous updates
Update February 23: Shares in Sundial Growers (SNDL) suffered early Tuesday as the broader stock market began taking risk off the table as Federal Reserve Chair Powel spoke in Washington. Inflation concerns have been to the fore of traders minds this week and any stocks with decent 2021 gains have suffered from profit-taking. This would appear to be the case with Sundial, which opened the year at $0.48 and rallied as high as $3.96, as no other news appears to be in evidence.
Update, February 24: Sundial Growers Inc (NASDAQ: SNDL) has been on the rise, surging some 10% to $1.39 on Wednesday. Optimism about a return to normal – thanks to regulatory progress in approving Johnson and Johnson's vaccine – is boosting sentiment. Moreover, progress in approving fiscal stimulus will likely free the Biden administration to move forward with other issues, such as further loosening marijuana rules.
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