Canadian cannabis company Sundial Grower’s Inc.
said Wednesday it has issued a notice of default to Zenabis regarding certain defaults under the terms of its senior loan. Sundial acquired a special purpose vehicle last week that owns C$51.9 million ($40.9 million) of the senior loan. Sundial said it had received a principal payment of C$7 million on Dec. 31 from Zenabis Investments Ltd., a unit of Zenabis Global Inc., in accordance with the terms of the loan. It said Zenabis is disputing the defaults. Zenabis later issued a statement alleging that Sundial made the investment in its lender as part of an effort to force it into a deal. “The Company believes the Senior Lender’s allegations to be spurious and without merit and intends to vigorously defend against what it considers to be an ill-disguised attempt to circumvent a fair and competitive process to acquire the Company by improperly foreclosing the equity of the Company or compelling Zenabis to enter into a transaction with Sundial,” said the statement.
Sundial shares were up 17% premarket, as part of a broader rally in the cannabis sector on hopes the pro-cannabis reform Democrats may take the Senate after Raphael Warnock won one of two Senate runoffs in Georgia early Wednesday, according to the Associated Press, bringing Democrats a seat closer to a Senate majority. With 97% of the expected vote total reported, Democratic challenger Jon Ossoff was leading Republican Sen. David Perdue by just 0.22 percentage points, according to data aggregated by the Associated Press. Sundial has a checkered history, and once had a $1 billion valuation. The stock closed Tuesday at 54 cents.