It has emerged with a two-pillar strategy: one pillar focused on cannabis operations and the other focused on investment operations, according to CEO Zachary George.
He worked in the alternative space, and he guided turnarounds and restructuring of a number of public entities in board and C-suite positions.
Instead of supporting a large portfolio with a high number of SKUs, the company is looking to cut down on what it is doing and excel at its chosen path.
The company’s cannabis operations are driven by its 450,000-square-foot, modular indoor cultivation and processing facility in Olds, Alberta.
Earlier this year, Sundial closed the acquisition of Inner Spirit and the Spiritleaf retail cannabis network.
The company is positioning to not only be a competitive LP but also to be a better partner to industry.
The team is considering upstream, midstream and downstream opportunities for future M&A, similar to a commodity-oriented model, according to George.
They came to the conclusion that there is almost no profit pool to compete for in the Canadian market due to its oversupplied and dysfunctional nature, according to George.
The company had approximately a quarter of a billion dollars of debt on its balance sheet and the marginal cost of debt capital in the high teens.
Sundial eliminated that debt and started to build large cash balances.
In early 2021, the company opted to take a more formal approach to its investments, forming the joint venture SunStream Bancorp with partner SAF Group.
Sundial also has some investments on its balance sheet that are not a part of the SunStream joint venture.
That will ultimately provide a buffer for the capital-consuming operations on the cannabis side of the business as the company works toward a healthier Canadian market.
The company receives invitations to provide capital to international companies on a regular basis, but right now, Sundial is focused on improving its operations and reaching profitability in Canada.
The Sundial team remains excited about the Canadian market, despite the challenges that exist today.
COO Andrew Stordeur is taking the lead on that effort, and the company is seeing significant progress on its potency and terpene profiles.
Sundial went through an aggressive restructuring process, one that George anticipates other LPs may have to experience themselves.
Sundial has that $400+ million credit portfolio as well as select equity investments, and it’s still sitting on approximately $600 million Canadian in current cash balances, according to George.
As the company’s model matures, George expects to see more interest from institutional investors and the emergence of a broader, balanced investor base over the next few years.
The volatility in the space and its track record on demand planning and revenue targets mean the company is not yet providing guidance, according to George.
The retail networks of Inner Spirit and Nova Cannabis, a strategic partner of Alcanna, generate a $300 million revenue run rate.
He expects the cannabis industry to ultimately take on the form of an oligopoly, and Sundial is aiming to adopt the characteristics of a successful player in that kind of space.