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Canadian cannabis stock SNDL (SNDL -2.55%) (formerly Sundial Growers) jumped more than 5% Tuesday morning after the company started a new chapter in its growth. The stock held onto a gain of 2.9% as of 3:05 p.m. EST.
SNDL announced the finalization of its acquisition of The Valens Company today, marking the start of its new strategy forward. SNDL first announced it took a 10% stake in the Canadian cannabis products and processing-services company in late 2021. It then said it planned to buy the balance of Valens it didn’t already own in August 2022. The acquisition is the culmination of a pivot in SNDL’s two-year-old business strategy to create an investment platform alongside its cannabis segment.
Image source: Getty Images.
During the first half of 2021, the company issued more than 1 billion new common shares to raise capital for use in making cannabis-related equity investments. Valens has become its flagship investment and should move SNDL to become a billion-dollar annual revenue company.
It also helps streamline the company with lower cost in-house manufacturing capacity, expand its potential product offerings, and provide cost savings. The company says the combination is expected to deliver close to $10 million of annual cost synergies.
SNDL shares are down nearly 60% in the last year after it has diluted shareholders to raise money over the past several years. SNDL paid more than $100 million for the balance of Valens it didn’t already own in the form of common shares as well as the assumption of debt. Investors are hoping this marks a new beginning for SNDL’s business and share price in 2023.
Howard Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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