Sundial Growers Inc. (NASDAQ:SNDL) announced a mass exodus of its executive team today.

The now-former CEO Torsten Kuenzlen has stepped away from the position and will no longer be involved with the company. Zach George who is currently a board member will replace him as CEO.

At the same time, executives including the Executive Chairman and the COO are also stepping down from their roles.

The management change is likely due to a stock price that has cratered 80% over the last year.

The stock price is down another 38% on this news, demonstrating investors are taking this as a signal management is abandoning a sinking ship, not that a turnaround is in the works.

Sundial said the management shakeup is part of an “optimization initiative”, which sounds like a euphemism for “things are not going so hot at the company right now”.

Sundial has faced slower than expected regulatory approvals of new stores and cannabis 2.0 products in Canada, which has really hurt the company along with everyone else in the industry.

The company is finally taking steps to cut costs, but the expected cost savings of C$10-C$15 million annually are just a drop in the bucket against an annual cash burn from operations of C$113 million.

 

How Much Cash Runway Does Sundial Still Have?

According to the latest earnings report from the end of September 2019, the company has about $C152 million of cash on hand.

At the new burn rate of $73 million, down from $77 million a quarter, that still only leaves them with enough cash to last until the end of March.

Of course, if the company needs more cash they can always try to cut costs in line with more realistic revenue assumptions, similar to MedMen, or they could continue diluting shareholders by issuing equity or taking on more debt.

In the past quarter, the company issued an extra 10 million shares when we exclude issuance related to prior convertible debt and the IPO.

These shares brought in an extra $C161 million worth of cash, which kept the lights on, but diluted shareholders by an eye-watering 10% in only three months.

Sundial is looking at a scramble to come up with C$48 million to pay off debt that will be due Aug. 16, 2020.

As we have learned from MedMen and other struggling cannabis companies, the best strategy is to avoid the stock until upcoming debt maturities are successfully dealt with.

Investors end up having their stake diluted no matter which way the debt maturity goes, so better to come in as a brand new investor once the company is on better footing.