Sundial Growers Is a Dilution Machine
When a company issues shares, it dilutes existing shareholders who end up owning less of the business. That can also lead to a falling share price because a flood of shares on the markets can instantly create an excess of supply. And it doesn't always have to be through an offering that more shares are issued. Warrants, for example, allow people to buy more shares at a specified price.
One company with a lot of warrants and incredibly high dilution is Sundial Growers (NASDAQ: SNDL). The cannabis producer reported its latest earnings in August, and the one number that stood out to me was not revenue or profit growth, but just how many more shares outstanding it has compared to a year ago. The company is a dilution machine, and even if it suddenly starts generating strong growth numbers, that may not be enough for investors to earn a good return given the possible dilution.
Image source: Getty Images.
Source Fool.com
