A regulatory filing report shows how a chain of cannabis stores that was once deemed as the “Apple store of weed” is impending financial collapse. Once valued as high as $1.7 billion as a public company, MedMen reported it has only $15.6 million in cash remaining. This is no match for their $137.4 million in debt.
“The conditions described above raise substantial doubt with respect to the company’s ability to meet its obligations for at least one year,” the company said in its filing last week.
The Los Angeles based company currently operates 23 stores across California, New York, and Illinois. With an eye toward cutting losses, MedMen sold its stores in Florida last year and is trying to sell its New York stores. The company further aims to renegotiate leases for the stores that remain in an effort to save the business.
Numerous weed retailers are struggling to stay afloat while being vastly outnumbered by illicit competitors that have sprouted all around, even in cities like New York where the state legalized weed for adults nearly two years ago. MedMen is just the latest of these businesses to face extreme adversity.
As the industry bubble of five years deflates due to excessive debt, falling marijuana prices, competition from illegal sellers and high taxes, increased emphasis is placed on the risk of entering the cannabis industry. Despite increased legalization of the substance, overhead costs can easily become overbearing and debt by nature is a nuisance.
Shares in other pot-related companies have suffered as well since the cannabis business lost its luster with investors. In fact, stock of Tilray Brands, a cannabis producer that is among the industry’s largest companies, and Canopy Growth, another big dog, is down more than nearly 90% from their all-time high.
The filing also shows that the company has already defaulted on some of its debt and it needs to obtain an extension or to refinance it. In 2018, MedMen went public on the Canada Stock Exchange through a reverse merger amidst an inrush of cannabis businesses.At the time, its shares rose to over $8, but today its stock trades for just 4 cents.