Sundial Growers Readies for Nasdaq Listing

Sundial Growers put out a release this morning, indicating that the firm had raised over C$207.6 million in the last quarter for its operations, with an additional C$44.6 becoming available on the fulfillment of certain conditions.

The Canadian licensed producer of cannabis filed its preliminary filing late Friday evening to become the second producer to list first on a US exchange, after Tilray did a similar move last year. The company is seeking to trade under the symbol “SNDL” on the Nasdaq.

Sundial’s prospectus reveals much about the company’s operations which were previously unknown to the public. The filing comes after the firm released news Friday morning identifying that it was acquiring UK-based Bridge Farm Group. While financial figures were not released at the time, it was identified that the firm currently has 1.5 million square feet of indoor grow space, with plans to expand the footprint to 3.5 million square feet by the end of 2021.

Part of Bridge Farms UK-based operations

Bridge Farm will act as Sundial’s entrance to the European market space, and will be used to grow both hemp and cannabis following regulatory approvals from the UK government. The operation currently has a license to grow hemp indoors at one of its facilities, which currently consists of 40,000 square feet. The remainder of Bridge Farm’s operation currently grows ornamental plants, flowers, and herbs. The company expects to transition to hemp and cannabis as regulatory bodies allow.

The acquisition of Bridge Farm was completed on July 2 by Sundial, for which it paid the following according to the preliminary filing.

  • (i) cash consideration in the amount of £45.0 million,
  • (ii) the issuance of $45 million aggregate principal amount of unsecured notes of Sundial, which have subsequently been converted into 1,500,000 of our common shares and
  • (iii) contingent consideration in the form of earn-out payments of up to an additional 1,000,000 common shares of the Company based on a prescribed formula

Due to the nature of Sundial’s IPO pricing not yet being revealed, total consideration at this point in time is difficult to quantify.

Based on Sundial Growers preliminary filing, it appears that the Bridge Farm acquisition was strategic in that it enabled the firm to purchase topline revenues. For the period ending March 31, 2019, Sundial’s Canadian operations generated only $1.69 million in revenue in total – a figure that is very much out of line relative to the funding the firm has raised as of late. For the same period, Bridge Farm generated $9.08 million, bringing total revenues for the quarter to $10.77 million. Similarily, while Sundial generated $nil in revenues for the ten month period ending December 31, 2018, Bridge Farm recorded $20.4 million.

Gross revenue for the period ended June 30, 2019 is estimated to be between $18 and $21 million for Sundial, however it was not identified what portion is attributable to Sundial’s legacy Canadian operations.

In regards to these operations, Sundial currently has distribution agreements in place with five provincial bodies, which will be fulfilled by facilities in Olds, Alberta, Rocky View, Alberta, and Merritt, BC. Collectively the firm currently has 60,000 KG of licensed capacity within the country, but the figure will be closer to 95,000 upon the final completion of both facilities.

Upon final completion, the Olds Facility will be approximately 448,000 square feet in size, Rocky View will consist of 31,000 square feet, and the Merritt facility will be 35,000 square feet. The Rocky View facility is currently fully built out, with no further expansion plans. Sundial is estimating production capacity to reach 75,000 KG by the end of the 2019 based on current construction schedules, with a capacity of 95,000 KG upon completion of all build outs.

No timeline has been given for when Sundial Growers anticipates completing its go public transaction.

Information for this briefing was found via Sedar and Sundial Growers. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.