Sundial Growers Inc (NASDAQ: SNDL) is continuing for the top in the market this morning, following up on the recent gains that we’ve seen out of the stock. This is a real head scratcher for many considering the fact that analysts have been cutting estimates. Nonetheless, there’s good reason for the move. Here’s what’s going on:
While Sundial Growers didn’t release any news this morning, there’s plenty to be excited about. A quick search on message boards shows that investors seem to all be talking about the same thing, the potential for an acquisition.
The fact of the matter is that while investors are getting behind SNDL stock, the company is feeling some pain. As a result, management at the company announced that they are exploring strategic alternatives. That’s a huge announcement.
Of course, when investors hear about a strategic alternative exploration, the first thing that tends to come to mind is the potential for an acquisition. After all, when a company gets to the point of exploring strategic alternatives, potential buyers know that they’re getting a decent discount and investors know that even with a decent discount, strong returns are likely on the horizon.
There’s A Good Chance That An Acquisition Will Happen
With a pot-friendly Biden Administration moving into the White House, pot is hot yet again. There are strong beliefs floating around that the Biden administgration will ultimatley move toward the federal legalization of cannabis, which would open the floodgates for the industry as a whole.
As such, large companies in the sector are likely looking across the industry for accretive acquisition opportunities. SNDL is probably the best of these opportunities available today. There are a few reasons for that:
- Vape Involvement. Dried cannabis flower was all the rage, but it is losing its luster. These days, investors see opportunity in cannabis vape companies. Recently, SNDL has been cutting back on its dried flower offerings and focusing heavily on vape products, an appealing move for those who may be interested in taking the company over.
- Investor Awareness. Sundial Growers stock is one of the hottest stocks on the pot market today. Therefore, an acquisition of the company has the potential to increase investor interest in the comapny’s stock that purchases SNDL.
- Cheap. Due to recent offerings and signs of financial hardship, SNDL stock is trading at what I, and many others, believe to be a steep discount. Therefore, even if a suitor offers a strong premium, they’re getting in on the deal pretty cheap.
The Bottom Line
The bottom line here is that when investors look at Sundial Growers, what they see is a major opportunity. With the company deciding to move forward with a strategic alternatives exploration and the pot space being hot at the moment, things are lining up perfectly.
Moreover, considering the fact that SNDL is active in the vape space, the allure of an acquisition is even stronger. All in all, SNDL stock is one to watch as an acquisition is highly likely.