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Wall Street's new billion-dollar pot firm returned half a dozen bad weeds as it became public

The newest cannabis company on Wall Street, Sundial Growers Inc., sold a half-ton pot given by corporate buyer Zenabis Global Inc. because it featured mold, rubber glove parts and other non-cannabis material, according to famous people. with the case.

A sales attempt would be equivalent to 10% of the sundial

SNDL, -4.87%

total sales of cannabis in the second quarter are five tonnes. A lot of cannabis would be worth about $ 2.5 million ($ 1.9 million), assuming a price of $ 5 per gram. Sundial did not discover that the shipment was returned; a company spokeswoman did not return comments requests. The sundial announced earnings Wednesday morning.

In its June quarterly report the same morning, Canadian cannabis company Zenabis Global

ZENA, + 7.69%

announced that it had returned a half-ton pot and terminated its agreement to buy weeds from a "third party" it did not name. People familiar with the case say the party was a sundial and Zenabis gave away cannabis because the boiler was of poor quality and contained, among other things, pieces of rubber.

Sundial raised $ 143 million and went public on the Nasdaq on August 1, valued at about $ 1 billion. In its IPO filing, the company included a number of inventory-related risks but did not include a reference to half a tonne of cannabis returned. According to one investor who heard the sound, Sundial had not mentioned the return of half a ton during the road show presentation in Toronto. By filing an IPO and quarterly earnings filed with the Securities and Exchange Commission, the company has revealed about $ 3.3 million in penalties for non-delivery of cannabis, as promised to partners; these contingencies were from 2018 onwards.

See also: $ 4 billion Time Ball Buying at Major Marijuana Companies

Sundial said in its IPO documents that most of its sales are made to other licensed manufacturers in Canada. The company revealed that it hopes to reduce the percentage of its business that is based on sales to potential competitors by 2019 and to make it less sales in the future as it looks to compete in the premium cannabis market.

Sundial has struggled in the open market, dropping more than 30% of its IPO price on the first trading day. After reporting second-quarter sales on Wednesday morning, the stock rose 6.6% in the next session, the first daily increase in more than a week. Shares of the IPO that traded for $ 13 fell 5.9% to $ 10.54 on Friday.

Asked about the pot shipment Wednesday night, Sophia Pilon, Corporate Communications Manager at Sundial Growers, said in an email, "I'm not really sure what you're referring to." The company did not respond to several subsequent attempts at the next one. two days.

See also: $ 4 billion Time Ball Buying at Major Marijuana Companies

Obtaining quality weed has been a problem for the cannabis industry since Canada legalized recreational marijuana as licensed manufacturers have sought to meet demand and buy non-growing marijuana. Tommy Chen, an analyst at BMO Capital Markets, wrote in June that the bank had heard a number of anecdotes about "a dried flower that is considered non-competitive. [recreational] market according to certain quality criteria. "

Examples of such criteria are low potency, terpenes – odor-causing compounds – small bud size and inconsistent color, Chen wrote. A low potency flower may also be unsuitable for mining.

Sundial is a Calgary, Alberta-based weed grower, and operates the boiler trade in Canada. It also has operations in the United Kingdom, where it acquired Bridge Farm Group, a company that produces plants such as herbs, micro plants and plants commonly used for indoor and outdoor decoration.

Sundial Growers reported second-quarter losses of $ 12.4 million, or 16 cents on net income of $ 19.3 million. Zenabis reported second-quarter net losses of $ 18.5 million, or 9 cents, as part of its net income of $ 25 million.

Canadian Zenabis shares have fallen by about 72% this year and are now worth less than $ 300 million. Zenabis was worth nearly $ 1 billion when it debuted on the TSX Venture exchange in January, but has encountered short sellers, which led it to recently enter into a supply agreement with another licensed manufacturer, Tilray Inc.

TLRY, -10.85%

instead of trying to raise capital.

MarketWatch staff writer Jeremy C. Owens contributed to this article.

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