TheCannalysts have spent a fair bit of time looking at Inner Spirit Holdings ($ISH) – and chronicled their path from a money losing loss dumping retailer, into a company operating some 46 stores (as of writing) in the legal cannabis space.

Previous housekeeping has included the disposal of the WatchIt! business and a focus on opening Corporate locations. They’ve a fair bit yet undone, as we’ll see here. The current housekeeping?

While billed as an ‘investment’, the $600k they received from Brett Wilson was effectively a share transfer. An owner of shares in $ISH also happen(ed) to be a licensed producer. Thus, more than 25% of $ISH’s shares were owned by LP’s, which, blocked them out of adding additional licenses in Ontario. It also comes with the cancellation of 14MM warrants to accommodate that reality. Now, that’s cleared up, the faucet can be turned on.

They seem to prefer de-risking their exposure to cannabis by being a franchisor, which is relatively poor way for investors seeking to add direct cannabis exposure to their portfolio. Perhaps they’re cherry picking locations and leaving it up to franchisees to fend for themselves. Perhaps CEO Bondar sees it as a viable strategy. He seemed pretty hot for corporate locations not so long ago – being relatively cash poor is a likely straight jacket, and it’s going to be well fastened within this business model.

The second bit in the news release is about an acquisition of a franchise/licensee to gain a corporate store. What jumps out to me is the price – which appears to be effectively nil in terms of cash and its’ sale price.

For only $277k plus inventory, $ISH gets a cannabis store in full operation. Of which, little money will change hands:

So, a store that does $7.5MM in sales is apparently that cheap, and indebted to $ISH no less for just about the entire amount. I’d love to note the story behind this one, but where $ISH’s disclosure in the past has been above average, there’s nothing much to be found here on it.

$ISH also recently announced (far more quietly) an amended deal with High Park to preferentially promote certain products for certain periods of time. This is the whole reason for LP’s spending cash for retailer stock, as these sorts of ‘strategic’ alignments firm up LP distribution.

And again, most of the agreement is redacted around commercial terms – so we have little to go on. You can find it on Sedar, what’s there anyway. This is typical in retail, where opacity in relationships and margins and manoeuvres by staff at the customer level are all treated as trade secrets. Market share can be shifted by stealth, and this is how business works in retail. There is a relative labyrinth of regulations province to province, and look for ground-wars to expand in earnest both for customers, and what product is pushed to them to increase over the next year.

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 $ISH