Sundial Growers Inc. (SNDL) stock price went up by 11.06% as of market close on April 19th, 2021, settling in at a comfortable USD$0.9402. Subsequent pre-market fluctuations saw the stock price climb 4.74% to hit USD$0.98.
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SAFE Banking Act
This movement came hot the heels of the announcement that the U.S House of Representatives voted in favor of the passing of the SAFE Banking Act. The Secure and Fair Enforcement Banking Act will allow banks and alternative financial service providers to legally finance cannabis companies.
High Hopes for Senate Approval
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The bill has been gotten votes of support from all Democrats and more than half of the Republicans who cast their vote and is very likely to be approved by the Senate. Investors eagerly await the announcement of a date for when the Senate will vote on the bill.
Financial Woes for Grow-Ops
Hitherto, financial institutions tended to steer clear of licensed marijuana producers for fear of the federal law. Licensed and legal cannabis businesses were hard-pressed to obtain the most basic of financial services, such as payroll services and a business checking account. In the absence of bank loans within the industry, cannabis companies had to resort to much more expensive avenues of financing.
What will SAFE Banking Act Change?
Following the passing of the SAFE Banking Act through Congress and signing into law by U.S. President Biden, cannabis companies will be have unrestricted access to the capital they need to fund their growth initiatives. This bill has the potential to make cannabis companies much more efficient with their financing, which will, in turn, contribute to increasing shareholder value.
What does this Mean for SNDL?
This will solve a major issue for SNDL, which had to resort to diluting its shares with multiple offerings to raise the capital they needed. With less than 100 million outstanding shares in 2019 when the company went public, SNDL went on to issue an outrageous amount of its shares over time to fund its operations, pay off its debts, and have cash on hand. To illustrate, 1.15 billion shares of its common stock were issued from September 30th, 2020 to February 28th, 2021 alone.
Excessive Dilution of Shares
March 2021 saw SNDL file for an additional USD$800 million offering for shares offered at the market price. This could give SNDL the authority to issue another 888.9 million shares of its common stock, priced at the closing share price on April 14th, 2021 of USD$0.90.
Bright Outlook for SNDL
With the biggest investor woe being taken care of with the SAFE Banking Act, investors are flocking to capitalize on the much brighter financial outlook of the company. With easier access to finance, investors expect SNDL to significantly increase shareholder value over time.