Six years after an IPO that peaked at over $3 billion, cannabis retailer MedMen is now worth next to nothing. The bankruptcy filing late Friday in California courts is the nail in the coffin of a stunning fall from grace for a company whose problems point to broader challenges in the legal cannabis industry.
“MedMen has long been a ‘DeadMen’ for most investors,” said cannabis industry analyst Alan Brochstein Assets. “The world should have seen this coming, but not everyone did.”
MedMen quickly entered the legal cannabis market after California legalized recreational use of cannabis in 2016. Originally it was celebrated as “that”.Apple shop for grass“MedMen retail stores incorporated “sleek branding” and “high-end design aesthetics.” according to a 2022 investor presentation.
To capitalize on expectations of a boom in demand for legal cannabis, MedMen opened expensive storefronts in areas such as Venice Beach, New York’s Fifth Avenue and right on the Las Vegas Strip, capitalizing on a wave of positive press and public enthusiasm for legal cannabis.
Led by Co-founder and CEO Adam Biermanwho founded the company in his 20s, MedMen went public in June 2018 at just over $3 per share, and hungry investors drove the stock price to more than double by year’s end.
Encouraged by its early success, MedMen sought to expand: It took on hundreds of millions of dollars in debt And pursued a massive $682 million merger with rival PharmaCann.
But the deal fell through afterwards The Justice Department announced it would investigate the merger on antitrust groundsand MedMen struggled to repay its creditors as the overall cannabis market weakened and investors retreated amid fears that dangerous e-cigarette cartridges would lead to more regulation in the cannabis market.
“They went public in 2018. And when we reached 2020, [MedMen] was in big trouble,” Brochstein said. “They took on too much debt and somehow over-promised.”
MedMen’s shares slumped throughout 2019, losing 92% of their value as the retailer struggled to keep up with high tax payments compete with unlicensed sellers who undercut their prices. However, the pandemic sparked a boom in demand, giving MedMen and some other cannabis retailers a lifeline through 2020.
“The world has learned that if you fire people from work so they don’t get tested for drugs…[and] Give them money, what will they do? Get high all the time,” Brochstein said. “The cannabis industry did better in 2020 than anyone expected.”
Ultimately, however, it wasn’t enough. At one point, MedMen operated 25 stores nationwide and announced plans for international expansion. Today, all but two are permanently closed. Bierman was subsequently forced from office in early 2020 several high-profile lawsuits He accused him and his colleagues of racism, inflating company stock and misusing company money to finance a lavish lifestyle that included private security and custom Cadillac Escalades.
“Is this a one-time thing? No, unfortunately that is not the case,” said Brochstein. “I think it shows you that people can get overly in love with stores, products, things like that without doing the proper due diligence. This company has been a disaster from day one.”
MedMen filed for bankruptcy, where Liabilities of over $400 million were disclosedis the final chapter in the company’s spectacular collapse. High interest rates and bitter investor sentiment prevented the company from refinancing its debt The company has even stopped filing disclosures with the SEC.
“The capital markets were cut off for them, so they couldn’t fix their old mistakes,” Brochstein said.