MedMen, a California-based chain of cannabis stores once described as the “Apple store of weed” and valued at up to $1.7 billion, is on the verge of financial collapse. The company said it has only $15.6 million in cash left against $137.4 million in debt. Of course, it is just the latest of the former cannabis darlings to face a difficult situation as the industry bubble deflates.
Med Men, the Fall of a Giant
MedMen, a California-based chain of cannabis stores once described as the “Apple store of weed” and valued at up to $1.7 billion, is on the verge of financial collapse.
The company said it has only $15.6 million in cash left against $137.4 million in debt.
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MedMen Is Cash-Strapped and its Future Is in Doubt
“The conditions described above raise substantial doubt about the company’s ability to meet its obligations for at least one year,” the company said.
MedMen also noted that “its cash requirements are significant and cannot be met with current cash flow from operations.”
MedMen has faced a long list of challenges, from selling its Florida assets for $16 million less than the initial offer to a failed sale of its New York assets to multi-state cannabis operator Ascend Wellness.
The MedMen Survival Plan
MedMen said it would delay opening new stores, permanently or temporarily close underperforming stores, and conduct other restructuring activities. The company is still looking for a buyer.
Shares of MedMen (MMEN) were trading at 4 cents Tuesday on the Canadian Securities Exchange, down from $8 after its introduction.
Is the Cannabis Bubble Bursting?
When cannabis legalization first came to the US, there was a massive surge of investment and speculation in the industry as everyone attempted to get in on the ground floor. Before long, the industry was awash with way more money than it needed, and publicly traded cannabis companies saw stock prices go through the roof.
Since then, most have struggled to deliver on the promises of the “green rush,” but not from lack of demand. Quite simply, early investment oversaturated the market, leaving all but a few falling well short of early financial projections.
MedMen Faces the Cannabis Bubble
MedMen is just the latest of the former cannabis darlings to face a difficult situation as the industry bubble of five years ago deflates. When coupled with excessive debt, falling cannabis prices, competition from illegal sellers, and high taxes, the company faces a lethal combination.
MedMen, based near Los Angeles, operates 23 stores, including in California, New York, and Illinois. In an effort to cut costs, it sold its Florida stores last year, is trying to sell its New York stores, and is also trying to renegotiate leases on its remaining stores.
Of course, shares of other cannabis companies have also suffered from the cannabis sector’s loss of luster among investors. Shares of Tilray Brands, a cannabis producer that is among the industry’s largest companies, are down more than 90 percent from their all-time high, for example, while Canopy Growth, another major player, has lost a similar amount.
(Featured image by ChrisGoldNY (CC BY-NC 2.0) via Flickr)
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