Much has been said about MedMen (MMEN.C) and its losses, and little of it good.
A look at the poor devils’ balance sheet shows little cash to speak of, just over USD$33 million, and an onerous, delicious amount of liabilities–accounts payable and accrued liabilities exceed MedMen’s cash reserves by $16 million.
Ah, what high hopes there was for MedMen. The company’s acquisition of PharmaCann gave it vaunted distribution throughout the United States, transforming the company into the ‘Apple Store of Weed.’
The resulting pro-forma company (including pending acquisitions by MedMen) is anticipated to have a portfolio of cannabis licenses across the U.S. that will permit the combined company to operate 76 retail stores and 16 cultivation and production facilities. The combined company will operate in 12 states, which comprise a total estimated addressable market, as of 2030, of approximately $40 billion according to Cowen Group.
The acquisition was called transformative, meant to catapult MedMen to the forefront of the race between American multi-state operators. On Oct. 8, 2019, both companies agreed to terminate the agreement.
The Globe and Mail also recently published an article by Nav Malik of Industrial Alliance Securities which was less than flattering.Malik said the company’s $250 million senior secured convertible credit facility with Gotham Green Partners created an “elevated risk profile” and downgraded the stock from a buy recommendation to hold.
“To date, Medmen has borrowed $125-million under this facility in two tranches. A third tranche for $10M is expected to be funded within 30 days. The key amendment, in our view, is that the fourth tranche for $115-million now requires the consent of the lender (whereas previously it was at Medmen’s option), adding some uncertainty as to whether Gotham Green will fund the final tranche. As such, Medmen will likely evaluate other financing alternatives. Other amendments to the facility essentially provide Medmen with the flexibility to seek alternatives.”
Over $244 million was spent on general and administrative tasks by MedMen in 2019, double their revenue for the year.
The company’s losses have been mounting now for some time, and so they’ve turned to Gotham Green Partners for capital, though the terms have changed somewhat in recent days.
The investment was for $250 million, accessible in five tranches. But the third tranche, previously $75 million, is now only $10 million “in order to minimize dilution given the current capital market environment.”
In addition, the Company has agreed to form a committee to select new independent directors to be appointed or elected to the board, which directors would form a majority of the board. The Company will propose director candidates to this committee for consideration and approval.
With a $0.75 loss per share for the 2019 fiscal year, and with a $277 million net losses and comprehensive losses, the company has consistently disappointed in its performance, but has succeeded in one respect.
Key management personnel within MedMen were paid $43.4 million during 2019.
Well played, my friends.