Decibel Cannabis ($DB) is somewhat unique in the Canadian space. Not in that they are making money hand over fist (they’re not), nor that they have a reasonable share count/capital structure. Nope.

But they are growing sales, particularly over a couple of tough quarters for many out there. Our last look at them didn’t really come to much of a conclusion, and I admit to being high centred on forming an opinion about them.

The near-term cash issues pointed out have been apparently dealt with, as a new term credit facility was announced recently. Thumb-nailing it, I’d guess they’re swapping into ~=$27MM of new debt to satiate current liabilities/convertibles/old debt, with the remainder to go to working capital and the like.

That $DB has been ruthless on office supplies is a good portent, and a swap to a lower interest rate is also a positive. Their net finance cost/interest will remain relatively static, but that they were able to do it on an as yet unpublished fiscal year is again a potential happy place for investors.

The reality is that with 400MM shares and a $52MM run rate, this thing is out in the middle of a field right now in terms of generating returns for shareholders. To myself, it’s purely an asset play for potential buyers of the company: will someone (anyone) in the Canadian space want to buy $52MM in annual sales for a $54MM market cap? Will $DB be interested in selling?

Supreme ($FIRE) convinced Canopy to do so, but, that’s a ways back in the rearview now. And the current situation sees many in the sector living on a starvation diet. Time is the weapon of the wolves, and thinking about the LP space, I can’t help but get a mental image of a bunch of sheep standing in the middle of a clearing, surrounded by woods at dusk, with the sun setting quickly.

Perhaps a little dour, but the business question for a potential acquirer is: “do we wait this out, or do it now?” The flipside of that question is who can do it. Cronos ($CRON) seems lost in space, limited to subcontracting production. Canopy? Laughter is the best medicine, but honestly, nothing they do would surprise me.

A merger/combination doesn’t sound of much utility to $DB, absent synergies/regional exploitation. And $DB is doing all they can right now to shore regional gaps up. This makes me think of an Avant Brands ($AVNT) – more focused on upstream, but definitely the same model of car. A combination between them makes little sense to myself: if one is going to pull up stakes – why do it just to move to a different campsite?

Despite all of this, the core is what’s in the mind of management at $DB. Their Board is pretty inbred, and their CEO (on the Board, natch), presents himself on their website like this:

If there’s a ‘tell’ in that, it doesn’t exactly scream a ‘long-haul’ kind of person. Nor does the Chair:

So. A potential target for Sundial ($SNDL)?

As speculative stocks go (<cough> like the entire legal cannabis sector), I’ve seen higher risk for more money. Meh. This one is bugging me inasmuch as I see something positive here, but can’t foresee a road ahead. The business story suggests they’ll plug along for the next 5 years, servicing their debt, growing organically, eventually bringing some sort of EPS that isn’t taken to 7 decimal places.

Just some musing before I go chop wood. My instincts to trade this thing has largely been kept in check. A solid Q4 might change that.

The preceding is the opinion of the author, and is in no way intended to be a recommendation to buy or sell any security or derivative. The author holds no position in $DB as of writing.