Yes, small seedlings that dry out may not recover at all, those that do
get a late start to the season, etc. They have so little roots that they
can go from just slightly wilted looking to dead as a doornail in one warm
day.
Potting up gives them space to greatly multiply their roots. A root
stimulant like a mild dose of liquified kelp or kelp extract will help
them take advantage of that as rapidly as possible. Even mixing
some kelp meal into the potting up seedling mix will help, because
every time you water they effectively get a light dose of kelp tea.
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