What happened
Acquisitive Canadian marijuana company SNDL (NASDAQ: SNDL) has gone shopping yet again, and investors aren't happy about it. In the wake of news about SNDL's latest planned purchase, reported after the market closed Wednesday, they traded the stock down by almost 5% on Thursday.
So what
SNDL said it has signed an agreement to potentially acquire "substantially all" of Superette, a relatively small cannabis retailer also based in Canada.
As explained by SNDL, the somewhat complex deal will see it bid for Superette rather than purchase it directly. In the company's words, the deal is to occur "through a hybrid asset purchase and 'reverse vesting' transaction."
As part of this, Superette will petition a court in its native Ontario to approve a sale and investment solicitation process, among other measures. Assuming this is approved, a floor would be set for alternative bids from other parties interested in acquiring the retailer.
Superette has six stores in Toronto and Ottawa -- two of Canada's most populous cities.
SNDL is not coming fresh to Superette. In February, it entered into a secured promissory note with its would-be acquisition, at a principal remaining amount of 4.8 million Canadian dollars ($3.7 million). As part of its bid for Superette, SNDL has committed up to an additional CA$2.1 million ($1.6 million) in financing for the retailer. These funds will, SNDL said, allow the apparently troubled Superette to operate during the bidding process.
Now what
Investors are likely down on SNDL because they don't feel yet another asset buy will substantially boost the company's prospects. They might also believe that a six-dispensary marijuana retail operation with a limited geographic footprint isn't really worth the time, money, and effort SNDL spent pursuing it.
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Eric Volkman 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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
