- SNDL began 2020 with C$220 million of debt and finished 2020 debt free.
- The SNDL brand expansion into new market segments has been impressive, to say the least.
2020 was a challenging year for Sundial Growers, as it was for most companies. They entered 2020 with C$220 million of debt and concerns of how Covid-19 might impact their business. However, unlike many companies, Sundial Growers came out of 2020 financially stronger and with increased optimism regarding building shareholder value in 2021.
So how did they do it?
Through a series of strategic changes, paying debts to zero and partnered expansions.
Sundial Growers announced just a few days before the end of the year, on December 21, 2020, that the company had paid down all C$220 Million of debt that it started 2020 with. That is a monumental accomplishment which saves the company a whopping C$4 million a year in interest payments and perhaps more importantly, by reducing the company’s debt to zero it lifts all of the restraints regarding the company’s ability to pursue strategic opportunities moving forward and into 2021.
Parts of their strategic plan for success in 2020 came to fruition in the last month of the year. In the last week of December Sundial announced 2 separate accomplishments in their plans to continue to expand and increase shareholder value.
First, the completion of an all-cash purchase of a special purpose vehicle that owns C$58.9 Million of principal debt of Zenabis Investments. The loans bear Sundial interest at 14% a year and have a maturity date of 2025. There are additional financial benefits in the purchase for Sundial as well.
Additional benefits, you ask? Zenabis Investments will be paying Sundial a royalty on Quarterly basis on their sales from 3 separate lines of revenue for 32 quarters (8 years). The revenue streams from which Sundial will now receive royalties includes their medical, wholesale, and recreational cannabis line.
Second, On December 28, 2020, Sundial announced that it has entered into a license agreement with Simply Solventless Concentrates. Sundial will be using (SSC) for the processing and manufacturing of cannabis concentrate products. This partnership offers Sundial even further expansion in 2021 and access to yet another new market segment.
Another notable strategic move from Sundial came just one month earlier and with a focus on brand expansion. On November 9, 2020, Sundial announced a partnership with Chokolat to launch a cannabis-infused confectionary brand. This allowed Sundial to expand into the edibles segment. The companies have announced they expect to scale the collaboration across the country, beginning in the Alberta market.
Sundial Growers entered 2020 with C$220 million of debt, yet today, just 11 days into 2021 Sundial Growers has C$52 million cash in hand and zero debt. Sundial Growers financial accomplishments through 2020 have been quite impressive, to say the least.
The SNDL brand expansion into new market segments and newly created strategic partnerships have already added considerable value for the shareholders of 2021.
Near Term (Potential) Positive Catalyst:
Up until now, Canadian cannabis companies couldn’t sell their products in the United States. That’s likely to change very soon. Entering 2021 Democrats have acquired control over congress, and the senate. With the Democrats’ views on cannabis legalization, and how the needed tax dollars could be used for the changes the politicians plan to make, there’s a strong chance of legalization in the near future. Sundial Growers (SNDL) will then be able to export their products to the United States. Gaining access to the US market as an additional revenue stream would be a monumental event for Sundial Growers.
(Author’s note: Always conduct your own thorough due diligence before electing to invest in microcap stock.)