Rumours are swirling around Twitter and Facebook Friday night that MedMen (OTCMKTS: MMNFF) is reaching out to debtholders and service providers to negotiate a restructuring of the company.
Hey is anyone still in #MedMen asking for some creditors… cc @ChrisParry remember @invest420 gets paid by them through “marketing/dashboard” nonsense and gave CEO a platform on his site to write about how great they are when they were $2 $mmen $mmnff. Gotham going to own a 🐚 pic.twitter.com/NhxxJSORLs
— Jason Spatafora (@WolfOfWeedST) January 18, 2020
The company is rumoured to be offering $0.50 on the dollar to owners of MedMen debt and telling certain service providers that they aren’t able to pay outstanding bills.
On the other hand, the rumors could simply be related to Medmen’s attempt to save as much working capital as possible by stretching out payments with vendors.
We will likely hear more in the coming days as rumors in potstocks rarely stay rumors for long.
Grizzle warned investors on Oct. 29, 2019 that MedMen already looked like it had run out of cash.
At the time the stock was trading for C$1.80 a share.
Fast forward to today and the stock closed at C$0.75 a share, down 60% since our report was released.
Based on the amount of debt already on the balance sheet and the staggering cash burn rate, we estimated MedMen would have almost run out of cash by early January, even if they drew down the rest of their loan from Gotham Green Partners, a cannabis-focused hedge fund.
It looks like our predictions largely came true.
A Promising Story Cut Short by a Short-Sighted Focus on Growth at all Costs
MedMen has one of the most well-known brands in Cannabis and extremely profitable dispensaries in California, but the hyper-aggressive management team has been the company’s undoing.
They spent like drunken sailors in pursuit of market dominance but severely miscalculated.
Once investors soured on funding money-losing cannabis companies, they were stuck with a business hemorrhaging cash and already loaded up with debt.
It looks like management realized how bad the situation truly was far too late and just couldn’t cut costs fast enough.
If MedMen ends up going through a restructuring it would be the largest cannabis failure the industry has seen yet.
Unfortunately for cannabis investors, we don’t think it will be the last.
The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Grizzle hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.