scorecardThe CEO of troubled cannabis company MedMen told us investors were right to punish his stock. Now he says they'd be smart to bet on a turnaround.
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The CEO of troubled cannabis company MedMen told us investors were right to punish his stock. Now he says they'd be smart to bet on a turnaround.

Jeremy Berke   

The CEO of troubled cannabis company MedMen told us investors were right to punish his stock. Now he says they'd be smart to bet on a turnaround.
Retail4 min read
  • The cannabis company MedMen has been hit with plenty of setbacks, sending its stock tumbling.
  • MedMen's bad news in recent months includes the departures of senior execs, two rounds of layoffs, asset sales, and ongoing lawsuits.
  • We spoke to MedMen CEO Adam Bierman about the company's path forward.
  • Bierman said that while he was slow to restructure the company, he is confident in MedMen and expects the stock to rebound.
  • Click here for more BI Prime stories.

MedMen, a flashy cannabis retailer with stores in locations like Las Vegas, Venice Beach, and Manhattan's Fifth Avenue, has been punished by investors.

The stock is trading under 50 cents per share, down sharply from more than $3 a year ago. In some ways, the firm is a poster boy for the pitfalls of the hype surrounding the legal cannabis industry, where companies that were once focused on growth have been forced to pare back.

Adam Bierman, the CEO of MedMen, says investors were right to send his stock lower, and that he's working on a turnaround.

"The investor community and the street, they don't really get anything wrong," Bierman told Business Insider in a Thursday afternoon phone interview.

"If our stock is trading at a tremendous discount to our peer set, there's a reason for it," Bierman said. MedMen confirmed it has engaged a turnaround firm, FTI Consulting, to help with the company's restructuring process, including negotiating with vendors.

Bierman said the restructuring process will help push the stock back to where its peer companies are trading. "Just trading in line is, maybe, 10X from where we are today," he said

Executive departures, lawsuits, and corporate controversies

MedMen has been rocked by a series of executive departures, lawsuits, and corporate controversies over the past year.

David Dancer, the company's chief marketing officer, departed in September after less than a year on the job, as Business Insider reported in September.

Former CFO James Parker filed a wrongful dismissal suit last February, which cited his concerns about rampant spending within the company and an unhealthy work environment.

Chief Operating Officer Ben Cook, General Counsel Lisa Sergi Trager, and SVP of corporate communications Daniel Yi left the company in April.

MedMen laid off roughly 40% of its corporate workforce in November and December, in a push to be cash-flow positive by the end of 2020. A planned, $680 million all-stock acquisition of Illinois-based cannabis company PharmaCann was terminated in October.

The company has also sold off stakes it bought in cannabis brands - which it says will net the company $8 million - and has engaged Canaccord Genuity to "explore strategic alternatives" for cultivation licenses and stores "not deemed critical to the company's retail footprint."

Adam Bierman/ MedMen

MedMen also plans to limit new store openings and delay investments in the medical marijuana markets in New York and Arizona.

On top of all that, MedMen announced earlier in November that it was selling its stake in Treehouse, a cannabis real estate investment trust.

'The markets and The Street, they don't get it wrong'

Bierman said he was too slow to start restructuring the firm, as share prices in publicly-traded cannabis companies collapsed and investment dollars started to dry up.

"With the markets collapsing, and investors wanting to see different types of results from these companies, we're probably six months behind repositioning the business," Bierman said. "As a result, our stock price has been punished. I think that it was on us to enter into the restructuring, it was on us to execute our way through the restructuring."

Bierman said in his view, MedMen is one month out from completing the restructuring and getting the company back on track. The company is scheduled to report its next set of financial results on February 26.

Negotiating with vendors

Reports have also swirled on Twitter and in certain Reddit communities that the company has not been able to pay its vendors, including startup cannabis brands in California.

MarketWatch reported that MedMen was offering shares of stock instead of cash to pay vendors.

Though the company confirmed that the email reviewed by MarketWatch was real, MedMen CFO Zeeshan Hyder declined to address what he called "specific rumors that are on the internet" in a phone interview. He said that the company is "working with all of our key vendors across the company to figure out the right payment plan and solution that works for both sides."

Hyder said that some vendors told the company they'd prefer MedMen to deliver them shares upfront, rather than negotiating a deferred payment plan in cash.

"One of the things that we've been focused on as part of the restructuring efforts is to optimize our working capital and to preserve cash, just given the current capital markets environment," Hyder said.

When asked by Business Insider about rumors that the company is nearing bankruptcy, Bierman had stern words.

"Those rumors are completely unfounded, completely untrue, and salacious at best, and libelous at worst," Bierman said. "The company has not been in this strong of a position, from a cash position, an overall health position, and prospects for what's next position, in a very long time."

For cannabis companies, however, filing for Chapter 11 bankruptcy isn't an option, since THC, the chief psychoactive component of cannabis, is federally illegal in the US, Reuters has reported.

Bierman said the fact that insiders such as himself, MedMen co-founder Andrew Modlin, their partner Chris Gannon, and outside investor Wicklow Capital invested in the last fundraise is a sign that they are confident in the company's future.

"You don't have insiders writing equity checks if the future is bleak, you have them writing equity checks because they understand what kind of massive upside there is, in this stock," Bierman said.

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