Cannabis retailer MedMen is no longer the $3 billion company it once was. In fact, the company is worth next to nothing and joins the massive and still-growing list of companies filing for bankruptcy.
The company’s fall from grace has been on investors’ radar for some time, spelling out the future of business practices in the cannabis industry.
MedMen Files for Bankruptcy
MedMen’s bankruptcy filing stated that the company owed over $400 million in liabilities. High-interest rates and a massive loss in investors prevented the company from refinancing its debt obligations.
Fortune reports that the company stopped filing disclosures with the SEC. It looks like MedMen may not recover from this bankruptcy filing.
MedMen Explains Its Decisions
MedMen MMNFF said that the decision to file for bankruptcy was a difficult one to make, but necessary after careful consideration of the current financial condition of the company and its subsidiaries, their inability to pay their liabilities as they become due, and the anticipated enforcement actions of secured creditors,” according to a statement.
Riley Farber, a unit of B. Riley Financial Inc., announced that it would shut down operations and proceed with liquidation after being named the company’s bankruptcy trustee.
The Humble Beginnings of MedMen
Adam Bierman co-founded the cannabis store in his twenties and entered the cannabis game in 2016 after California legalized it for recreational use.
After the legalization of recreational cannabis in some states, MedMen opened expensive storefronts on Venice Beach, New York’s Fifth Avenue, and near the Las Vegas strip.
MedMen Becomes a $3 Billion Company
Fanfare and positive reviews made investors excited about MedMen. Once the company went public in 2018 with shares starting at $3, investors helped the share price double by the end of the year.
MedMen was a success story in the making, with support from consumers and investors encouraging the owners to scale up.
The Tides Turn on MedMen
Unfortunately, scaling up came at a steep price. According to Fortune, MedMen accrued hundreds of millions of dollars in debt as it expanded operations. The company’s debt only worsened as it pursued a $682 million merger with competitor PharmaCann.
However, this merger would fail, as the Department of Justice announced that the deal would violate antitrust laws.
MedMen’s Financial Problems Worsen
MedMen struggled to pay back its creditors as the cannabis market became normalized and worries about suspected regulations around the hazardous vape cartridge made investors step away from the company.
“They went public in 2018. And by the time we got to 2020, [MedMen] was in big trouble,” cannabis industry analyst Alan Brochstein said. “They took on too much debt, and kind of overpromised.”
The Last Lifeline for MedMen
By 2019, MedMen’s stock had tanked. The cannabis retailer had lost 92 percent of its value and struggled with high tax payments and creditors. Consumers were choosing unlicensed sellers with lower prices compared to MedMen’s prices.
Once the COVID-19 pandemic hit, MedMen received a lifeline, and a boom in recreational cannabis provided the company with the revenue necessary to stay alive.
The Downfall of MedMen
However, post-pandemic business life was not favorable for MedMen. Instead, the company, which at one time operated 25 storefronts across the country, now operates two stores nationwide.
Multiple high-profile lawsuits accusing him and fellow executives of racism forced Bierman out in early 2020, causing stocks to plummet.
Scaling Up Comes at a Price
Brochstein said that a downfall like this isn’t uncommon for companies in and outside of the cannabis industry.
“Is it a one-off thing? No, unfortunately, it’s not,” Brochstein said. “I think what it tells you is that people can get overly enamored of stores, or products, or things like that, without doing the due diligence. This company has been a disaster from day one.”
Higher Ups at MedMen Abandon Ship
MedMen’s Chief Financial Officer, Amit Pandey, resigned on Feb. 12, followed by all of the company’s directors, before the bankruptcy filing. A meeting is scheduled for mid-May to discuss the company’s future with creditors.
The company stated that it will dissolve or liquidate the operations and assets of MedMen’s subsidiaries according to applicable laws in the U.S.
The Future of the Cannabis Industry Without MedMen
Cannabis has proven lucrative to the U.S. economy, with sales estimated to exceed $112.4 billion in 2024, according to the MJBiz Factbook. Despite the U.S. economy seeing slow growth, the cannabis industry seems to be doing just fine.
Although cannabis sales are dipping in California, the cannabis industry will do just fine without MedMen.
