MedMen in Trouble: Could Executive Team be to Blame?
Media reports today said pioneering cannabis retail chain MedMen Enterprises, Inc., may be in the midst of a financial crisis and is offering to pay its vendors with company stock, in lieu of cash.
Financial news website Marketwatch reported MedMen Chief Financial Officer Zeeshan Hyder had confirmed to them that the company was “restructuring” and had been working with retail vendors to make arrangements, including stocks as an option for some.
MedMen has faced ongoing turbulence; most recently in mid-November the company laid off nearly two hundred employees—twenty percent from corporate positions—which signaled the beginning of the restructuring. Media reports at the time said MedMen also would shed $22 million in non-core assets, including real estate investments, in an attempt to get back in the black.
The company in November told the Los Angeles Business Journal that plans for restructuring would include a moratorium on any new store locations being opened in 2020, and also would delay investment in medical-only markets. MedMen said they would also sell off stock holdings from some investment partnerships in other cannabis businesses.
In January 2019, former MedMen executives filed a $20 million suit against the company in Superior Court in Los Angeles: “Original [MedMen] investors Brent Cox and Omar Mangalji describe MedMen as ‘a complex web of interconnected subsidiary entities, virtually all of which are directly managed, directed, controlled, and owned by [CEO Adam] Bierman and [President Andrew] Modlin, and all of which always pursue the best interests of Bierman and Modlin, rather than the best interests of any stakeholder or entity,’” mgRetailer reported. In June, the case was dismissed as without merit.
Former MedMen Chief Financial Officer James Parker sued the company for wrongful termination in late January 2019, amidst accusations of inappropriate homophobic and misogynistic behavior on the job, as well as humiliation by co-workers.
MedMen co-founder Adam Bierman responded to Parker’s accusations with a public statement to employees and said, “MedMen is focused on creating a cannabis experience that is inclusive of and accessible to everyone. We hold ourselves to the highest standards of business and social responsibility. Corporate governance and best practices in policies and procedures are the foundation of MedMen’s health, and they have never been stronger nor the company healthier.”
In April, two members of the executive team left MedMen citing “financial duress,” as rumors mounted in the media of overspending and hostile work environment at the company. MedMen Director of Communications Daniel Yi stepped down at the same time, though his reasons for leaving were not clear.
In July, entertainment trade paper Variety reported Bierman had purchased an $11 million home in the Hollywood Hills, not far from the MedMen shop in West Hollywood, California.
Pundits speculate MedMen is also suffering from the effects of the chill on cannabis stocks that became increasingly frosty in 2019, compared to red-hot stock valuations being touted three years ago. MedMen (MMEN – CNSX) stock price was holding steady at close of market today at .62 cents a share, down from a monthly high of .78 cents.
Especially in California, where state regulators have been slow to ramp up processes for legal cannabis entities and unable to rein in black market vendors, the state’s cannabis cultivators, manufacturers, wholesalers, and retail vendors are feeling the squeeze of tighter and tighter profit margins. Without investors or access to funding from traditional banking entities, MedMen and other legal cannabis companies, from California to Canada, are caught in a worrisome waiting game.
Early to establish in the retail cannabis chain market, Culver City, California-based MedMen has thirty-three stores in nine states, including flagship stores in West Hollywood, California; Las Vegas; New York City; and Orlando, Florida, among others.