Sundial Growers Inc (NASDAQ: SNDL) stock is rocketing in the premarket this morning, trading on gains of more than 50%. There hasn’t been any substantial news as of late, but the company did announce yesterday that it would be participating in the 2020 Cowen Boston Cannabis conference.
Nonetheless, it seems as though yet another short squeeze is taking place here, generating dramatic gains. Here’s what’s going on:
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SNDL Short Squeeze Sends the Stock Through the Roof
As mentioned above, Sundial Growers is rocketing in the market this morning with no apparent catalyst. While the copany announced that it would be participating in the 2020 Cowen Boston Cannabis virtual conference yesterday, but the news was released in the morning, and the stock was down yesterday. However, the news may have something to do with the run today.
The fact of the matter is that SNDL is generally a heavilly shorted stock. Of course, if the stock ticks up, those who sold the stock short start to see losses. As a result, they purchase shares in an attempt to cut the bleeding. When a stock is heavilly shorted, the masses run to cover, leading to a dramatic rise in volume and price known as a short squeeze.
That seems to be what’s happening with SNDL today.
While any mention of what started the short squeeze is purely speculative, I believe that the catalyst that started the move was the excitement surrounding the coming conference. Ultimately, there’s a hope among investors that we will hear more about the strategic options exploration.
SNDL Investors Are Hoping for an Acquisition
Recently, SNDL announced that it is exploring strategic alternatives. When investors hear that a strategic alternatives exploration is going on, the first thing that comes to mind is acquisition, and that’s definitely on the table at Sundial Growers.
Moreover, there’s a strong argument that an acquisition will take place. The company’s unique model of growing small-batch cannabis, coupled with its activity in the overwhelmingly popular vape sector gives potential suitors something to build off of. Moreover, with the current market cap in mind, the stock is heavily undervalued, giving potential suitors access to acquire the company at a discount.
So, investors are hoping that when the conference begins, they’ll hear news surrounding the potential for an acquisition, and that’s leading to prices propping up this morning.
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The Bottom Line
The bottom line is that from a financial standpoint, SNDL is struggling. So, the stock is a risky play. However, with high risk also generally comes high potential reward. If Sundial is acquired, the acquisition is likely to take place at a strong premium. Moreover, the company’s low price and quality products provide suitors with value. Moreover, with Joe Biden winning the recent United States Presidential election, the time is right for big cannabis acquisitions.
While investing on speculation of a potential acquisition is risky business, it can also be very profitable business, making SNDL stock one that’s hard to ignore.
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