Zach George – CEO of Sundial Growers ($SNDL) – today announced the acquisition of Inner Spirit Holdings ($ISH) for cash and shares.

George’s shopping spree – after a failed attempt at Zenabis ($ZENA) was predictable, especially sporting the pile of cash they have sitting under a marginal business model (to be fair, most LP’s look to be marginal). And today’s announcement follows on the heels of their disclosure of holding 10%+ in The Valens Company ($VLNS).

This after $SNDL put $20MM into Indiva ($NDVA) no less. And it appears that $SNDL is going to be rolling up companies across the value chain in pursuit of buying a viable business. Eesh.

$VLNS, $ISH, $NDVA: all non-accretive at the moment. With prices paid at/near February’s highs for each of them – and mostly all in cash. It’s one way – an expensive (and speculative) way – to build a weed company. Look at these tickers, which reflect the GME/WSB ‘stonk’ run earlier this year. $SNDL has bought into these companies at their highs….or in the case of $VLNS…set new ones:

A telling line was included in $SNDL’s press release, where the enthusiasm expressed about the addition of $ISH is somewhat muted:

Modest indeed. Despite sporting 86 ‘storefronts’, $ISH is ‘tiny town’ in my eyes, and I think this acquisition is the best thing that could ever have happened for $ISH shareholders.

$SNDL’s a interesting story from a business perspective, but far less interesting to me as a commercial one. They’re picking up assets that have been inflated by renewed but (I’m guessing) un-durable sector interest. I just don’t see these valuations being borne out by financial performance yet, and at the end of it, $SNDL’s obviously looking to hold a basket of ‘something’ in legal weed.

They’ve now got extraction/edibles exposure in $NDVA and $VLNS, retail in $ISH, and if they are indeed looking to expand across the value chain – an LP with sales (like $ZENA) would be a logical place for them to go. A $WMD perhaps?

One way or the other, $SNDL’s got a bank account and ambition, and it’s a pretty wide open field of zombies out there to pick off. Look for more to come from them. Should the Canadian sector wane hard (ala’ 2020), they’ll be holding a whack of assets purchased at recent highs, in companies not generating positive cashflow.

An alternative take is that the overall sector continues to grow, and that being able to tie in verticality will lead to something in totality that’ll be viable.

The one thing that does stand out to me is that this isn’t how a hedge fund would go about consolidating assets in a sector. Really…..it’s much the opposite.

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 any of the companies mentioned.