Cannabis Company MedMen Declares Bankruptcy with $411 Million in Debt

(CTN News) – MedMen, a multistate cannabis corporation, has filed for bankruptcy in Canada, leaving the industry with around $411 million in obligations.

MedMen reported on April 26 that the company had filed for bankruptcy under Canada’s Bankruptcy and Insolvency Act on April 24. B. Riley Farber Inc., a business consultancy firm, was designated the company’s bankruptcy trustee.

The company also announced that on April 23, its American subsidiary in California filed for receivership in the Los Angeles Superior Court to coordinate the dissolution and liquidation of its assets.

The receivership proceedings will result in MedMen’s subsidiaries’ operations and assets being dissolved or sold under US legislation.

While Amit Pandey, MedMen’s Chief Financial Officer, resigned on February 13, all of the company’s directors resigned just before the start of bankruptcy proceedings.

The decision to discontinue operations and file for bankruptcy and receivership was made after evaluating MedMen’s and its subsidiaries’ financial situation, failure to pay financial obligations and anticipated actions of secured creditors.

“The difficult decision to cease operations and initiate Bankruptcy and Receivership Proceedings was made after careful consideration of the Company’s and its subsidiaries’ current financial condition, inability to pay their liabilities as they became due, and anticipated enforcement actions by secured creditors.

According to the company’s press release, the board of directors deemed it in the company’s best interests to initiate bankruptcy and receivership proceedings after carefully considering available alternatives.

MedMen operates retail outlets and cultivation facilities throughout many states. It traded on the Canadian Securities Exchange (MMEN) and over the counter in the United States (MMNFF).

Adam Bierman and Andrew Modlin founded it in 2010, and it quickly expanded to create outlets in numerous locations around the United locations.

Before coming public in 2018, MedMen raised $110 million and secured more finance.

However, speculations of MedMen’s impending failure have floated online for years.

Due to rapid expansion, MedMen faced financial mismanagement, resulting in considerable debt and profit troubles. Legal battles, particularly over labor practices, aggravated financial problems and drew public attention.

Concerns about corporate governance and market volatility, regulatory compliance issues and continuous cash flow problems exacerbated the company’s problems. Negative publicity surrounding internal fights and senior exits also harmed MedMen’s brand, reducing investor confidence and delaying the company’s recovery trajectory.

MedMen has appointed more than five CEOs in recent years.

In 2023, the Green Market Report highlighted MedMen’s significant financial challenges, including a $137 million debt and only $15 million in cash and equivalents.

The company’s fiscal second-quarter earnings revealed a working capital shortfall, creating concerns about meeting obligations the following year. Despite Medmen’s cost-cutting efforts, total income declined significantly.

In January, MedMen’s stock price falls to $0. In the same month, MJBizDaily stated that MedMen implemented layoffs.

Tilray, along with Gotham Green Partners and other investors, announced plans to purchase $166 million in convertible debt and warrants from MedMen in 2021, contingent on U.S. cannabis legalization, despite facing losses, legal disputes, workforce reductions, and intense competition (Market Watch report).

If approved, the loan would convert into a 26% interest in MedMen stock by August 16, 2028. Tilray’s engagement was supported by a noncontrolling investment in Superhero Acquisition LP, which aims to increase the value of its MedMen share by improving its assets, such as storefronts and intellectual property.