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MedMen: A Small Step Forward

Jun. 01, 2020 5:08 PM ETMedMen Enterprises Inc. (MMNFF)13 Comments
J Cooper profile picture
J Cooper


  • Earnings were a mixed bag.
  • Debt remains a major concern.
  • Dilution is mounting quickly.
  • I can't recommend this for most investors, although I own a very small holding.
  • This idea was discussed in more depth with members of my private investing community, The Growth Operation. Get started today »

Source: MedMen

MedMen (OTCQB:MMNFF) is a turnaround cannabis story that investors may be wise to avoid. Its founders created a well-marketed retail cannabis brand that is able to generate significantly more revenue per store in the competitive California market, but they also ran the company and its stock into the ground through massive over-spending.

During 2018 and 2019, MedMen burned through a cumulative $560 million of cash through expansion and over-spending. Through this process, the company took on ~$230 million in debt, about two-thirds of which is with Gotham Green Partners. Wicklow Capital also invested $50 million of equity into MedMen in two rounds (1, 2) at an average price of $0.81 for 61.6 million shares.

In early 2020, MedMen's founders were ousted from power: Co-founder and former CEO Adam Bierman stepped down and Bierman and co-founder Modlin executed agreements which will eliminate their super voting shares (1,000 votes/share, giving them full control of the company) over the next year. Wicklow Capital's Ben Rose was appointed as executive chairman while Tom Lynch now serves as interim CEO and as Chief Restructuring Officer.

The adults have entered the room and things are improving. If only this had happened sooner.

MedMen's core issues are two-fold: Deep unprofitability due to overspending and a heavy debt burden. Since Bierman stepped aside, MedMen has made significant improvements on cost-cutting but debt remains problematic. That debt, if left unchecked, threatens to give Gotham Green Partners billions of shares as I have previously described.

On May 27th, MedMen announced results for its fiscal third quarter, the thirteen weeks ending March 28th (hereinafter "March quarter"). Prior to these results, analysts expected MedMen to grow their revenue by 11% to $49 million and to cut their adjusted EBITDA losses in half to $18 million. MedMen missed both of these targets and shares fell significantly on these misses. Despite

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This article was written by

J Cooper profile picture
I used to run a Marketplace service called The Growth Operation.  That service has subsequently been moved to Julian Lin, who is highly-skilled in analyzing and evaluating the cannabis investing marketplace.Julian has renamed the service to The Weed Investors, and it promises to continue to be a great resource and community for investors interested in this growing sector.  I am a contributor to Julian's The Weed Investors community.Thank you to each and everyone who previously subscribed to The Growth Operation.  I appreciate all of your support.-J. Cooper

Analyst’s Disclosure: I am/we are long MMNFF, TCNNF, GTBIF, CURLF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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