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Will Medmen Go Out of Business
12 décembre 2022

“Simply put, MedMen is a publicly traded company that withholds its shares from its shareholders. Management uses conflicting corporate structures that violate its fiduciary duty to its shareholders,” said Omar Mangalji, Partner and Founder of The Inception Companies. MedMen itself presents itself as a torchbearer of best practices and even claims in its advertising campaigns that they “incorporate marijuana”. If this is the case, they must adopt common corporate governance practices. This industry is exciting and full of opportunities, but if we do not create a safe and responsible environment in which individuals and institutions can invest their capital, explosive growth will be stifled. Given the history of the industry and its different stages of legality in different markets, it is doubly important that our industry is well above advice in all its corporate practices. We are confident that this model will produce strong financial results and growth opportunities in multiple states, and we will continue to identify brand licensing opportunities that will introduce the MedMen brand and retail experience to other markets in the U.S. and internationally. In the future, MedMen has probably already reduced its selling and administrative expenses to such an extent that further reductions may be difficult to achieve. He already doesn`t spend money on marketing and has reduced management. As a result, MedMen will find it very difficult to sustain itself on the basis of its existing operations. In our review, the most effective way to restructure the company is a Chapter 11 filing that gives MedMen the right to reject leases. However, it would also impact vital operations in California if the leases were rejected.

Either way, it`s a lose-lose situation for the company. The only way out of the death spiral is to find ways to increase sales and reduce expenses: the current management has done much of the second element, but the first element is missing and is crucial for a successful turnaround. But that doesn`t mean MedMen as a company has gone nowhere. Since leaving, the company has seen a handful of executives come and go as they attempt to restructure and reshape the company. MedMen is a leading U.S. cannabis retailer with an operational presence in California, Nevada, Illinois, Arizona, Massachusetts and Florida. MedMen offers a strong selection of high-quality products, including MedMen`s own brands MedMen Red and LuxLyte, through its high-end retail stores, on-site delivery, and roadside and in-store pickup. MedMen Buds, an industry-first loyalty program, offers exclusive access to promotions, product scraps and content. MedMen believes that a world where cannabis is legal and regulated is safer, healthier and happier.

To learn more about MedMen, visit www.medmen.com. Disclosure: I have/we do not have positions in these shares and do not intend to open positions in the next 72 hours. I wrote this article myself, and it expresses my own opinion. I don`t get any compensation for this (except for Seeking Alpha). I have no business relationship with a company whose shares are mentioned in this article. Ascend won that lawsuit earlier this month and will buy the New York deal for a revised total of $88 million, $15 million more than the original deal. As MedMen continues to transform its business model and position itself for future growth, our future strategy will include a lightweight asset management model that will allow us to leverage the power and strength of the MedMen brand. For MedMen to become a viable and independent entity, it must be self-sustaining on a cash flow basis. However, we don`t think the company has a path to self-financing based on its latest figures. It also lacks access to capital markets, so it has relied on its largest lender, Gotham Green Partners, for debt and equity financing. In 2020, MedMen significantly reduced its selling and administrative expenses, but the onerous leases entered into by previous management are proving to be a huge drain on cash flow. In the second quarter of fiscal 2021, MedMen earned a gross profit of $18 million, but selling, administrative and other SG&A expenses were $34 million, meaning operating cash flow excluding working capital was less than ~$16 million.

Add to this ~$10 million in interest expense, the quarterly cash burn is ~$25 million excluding working capital. Recent asset sales and financings will extend liquidity by a few months, but challenges remain acute. During the sale of the assets, MedMen continued to finance its loss-making activities. As we have carefully pointed out in the past, MedMen`s problem has been both its balance sheet and its cash flow. The company spent too much money on flagship sites in California that had negative cash flows. In addition, California assets generate very little organic growth, which is also a big problem. MedMen released its recent quarterly results, which showed a slight decline in sales, mainly due to the sale of the Illinois site. However, the rest of the company has not grown at all, which is very worrying. Most other OSMs recorded high double-digit organic growth in 2020; MedMen`s challenges are likely due to a combination of its home delivery service in California and ongoing restructuring efforts, which have undoubtedly impacted employee morale and customer perception. For starters, MedMen announced several asset sales to raise funds to support the rest of the business, including: Los Angeles-based cannabis company MedMen Enterprises Inc. MMNFF, +7.71% MMEN, +22.22%, said late Monday that it is currently exploring strategic alternatives for its New York operations.

The company has a grow facility in New York City and four dispensaries as part of the state`s existing medical cannabis program. “We are focused on maximizing our existing presence, including our operations in New York City,” said Ed Record, CEO of MedMen. “New York`s adult-consumer market will be disruptive for the entire industry, and we are looking at all options to ensure strong shareholder returns. This includes the potential sale of assets and/or the licensing of the MedMen brand. Ascend Wellness Holdings Inc. AAWH, +5.13% out of 15. August, said he would no longer go ahead with his agreement to buy MedMen`s properties in New York. Ascend said abandoning the deal would leave $70 million in cash and the New York market remained uncertain. Separately, MedMen announced that it has reached a $67 million agreement to sell its Florida properties to Green Sentry Holdings LLC. MedMen shares are down 65.2% in 2022, compared to a 54.7% loss for the AdvisorShares Pure US Cannabis MSOS ETF, +2.57%. For more information about MedMen or to find a pharmacy near you, visit www.medmen.com/stores. I will say that the layout was elegant and gave vibes to the Apple Store.

Appropriate, given that MedMen once aimed to be the “cannabis apple”. We expect the Company to clearly focus its efforts and resources on California, Massachusetts, Nevada and Florida going forward. Among these markets, California is clearly the most iconic market for MedMen, generating 60% of its current sales. Nevada is a likely divestment target given the lack of scale and challenges of COVID-related tourism reduction. Florida is also a potential target for divestment, depending on MedMen raising additional funds to fund its growth. Due to cash flow difficulties and COVID, MedMen closed 5 of its 8 locations in Florida in March 2020, but is now trying to open new stores. The Florida market is a very attractive market, but also very capital-intensive, because the wholesale market does not exist. Each operator must be vertically integrated and sell only their own products, which means that cultivation and retail go hand in hand.

Trulieve dominates the market, but many MSOs also spend money like Curaleaf (OTCPK: CURLF). We believe MedMen in Florida is disadvantaged by its balance sheet and may decide to sell its Florida operations for a handsome profit to fund its remaining portfolio. Record added, “We are focused on maximizing our existing presence, including our operations in New York. New York`s adult-consumer market will be revolutionary for the entire industry, and we are exploring all options to ensure strong shareholder returns. This includes the potential sale of assets and/or the licensing of the MedMen brand. MedMen (OTCQB: MMNFF) has disappeared from the limelight after several turbulent years following its IPO for cannabis investors. The company has lost most of its equity value and is now selling some of its assets to protect its remaining portfolio. We believe MedMen`s shares are still too speculative to invest, given its fragile balance sheet and high cash consumption. MedMen became a publicly traded company through a reverse takeover (RTO) on May 29, 2018. “Yes.” I answered. “How bad can this be?” In an almost ironic twist of fate, the strong presence of the MedMen brand could hamper its ability to continue. Our public securities filing documents are available on www.sedar.com.

MedMen still struggles to keep a profit even after Modlin and Bierman leave. Last March, it was estimated that the company was burning $25 million per quarter. In April 2021, Canadian producer Tilray acquired a majority stake in the company. Phone: 1 (778) 819-1184 Email: [email protected] Website: www.odysseytrust.com. The lawsuits have slowed, but they have not stopped. The most recent is Ascend`s lawsuit against MedMen, alleging that MedMen “materially violated” the agreement to sell an 86.7% stake in MedMen`s New York operations. Steve Gelsi is a senior reporter for MarketWatch covering banking and cannabis. Bierman and Modlin are even involved in lawsuits themselves, filing three lawsuits against the co-owners of Coastal Holdings Co., the company they joined under the radar last year.