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The unicorn of cannabis. The ‘Apple’ store of cannabis. The nationwide string of stores.
Investors once bought into the hype around MedMen Enterprises Inc. (OTC: MMNFF), but in the end, they got burned like a bad blunt.
MedMen is now in the process of winding down, an effort led by Richard Ormond, who is getting paid $180,000 to close down properties and sell assets. Ormond, who was brought on as the “chief restructuring officer,” is the co-founder and chairman of Ejudicate, which operates as Brief.com, an online dispute resolution company, and the principal of Stone Blossom Capital LLC, which provides receivership and restructuring services to the cannabis industry.
Ormond did not respond to requests for comments.
The company has already shuttered most of its locations in California and Chicago. It’s difficult to know what remains open, as the company’s website has been “down for maintenance” since on Friday, when news of the California closures hit the media.
Who’s been burned?
Gotham Green
Gotham Green was one of the biggest believers in MedMen, and the two have a long history.
In March 2019, MedMen signed a binding term sheet for a senior secured convertible credit facility of up to $250 million from funds managed by Gotham Green Partners. It was one of the largest investments to date by a single investor in a publicly traded cannabis company with U.S. operations.
At that time, the stock was trading at more than C$4 on the Canadian Securities Exchange and more than $3 on the OTC Markets.
By July that year, Gotham Green Partners and Wicklow Capital committed to a $30 million non-brokered financing of Subordinate Voting Shares at a price equal to $2.37 per share.
Today, Wicklow Capital is listed on Bloomberg as owning 12.16% of the outstanding shares. Gotham Green owns approximately 750 million shares.
Tilray
On Aug. 13, 2021, Tilray Inc. (NASDAQ: TLRY) acquired $165.8 million of senior secured convertible notes and related warrants issued by MedMen via the company’s ownership interest in a limited partnership.
Tilray’s ability to convert the convertible note, which has a maturity date of Aug. 17, 2028, was dependent upon U.S. federal legalization of cannabis, but it looks like MedMen will be out of business before that happens.
Tilray hasn’t written the investment off just yet, but it has given ample warning to its investors that this investment will likely not pay off.
Hedge Funds
According to Bloomberg and 13F filings with the SEC, several hedge funds also have a stake in the collapsing company.
Parallax Volatility Advisors owns 31 million shares of MedMen, or 6.25% of the outstanding shares.
Indulge Holdings LLC, which is associated with Michael Serruya, a former director of the company, looked to have 19 million shares.
MM Asset Management has 697,000 shares.
Beyond the finaciers
It’s not just the direct investors taking a hit from MedMen’s demise.
There’s the landlord for the company’s store with the high-priced rent on 5th Avenue in New York City. In February, Daily Beast wrote that New York real estate mogul Jack Cayre filed a default notice in the New York State Supreme Court demanding money for unpaid rent to the tune of $1.8 million.
The store is still open, but MedMen did not apply for an adult-use license in the state and remains only a medical operator.
And that landlord isn’t alone.
MJBiz Daily wrote that “one California distributor that’s owed tens of thousands of dollars is planning to file a lawsuit against the Los Angeles-based company… Other contractors – some owed upward of five figures – are contemplating legal action against MedMen as well.”
What’s next?
The stock is priced at zero, and no longer trading. The OTC Markets has given the company a double black diamond rating as a risky stock and quotes aren’t available to the public.
While some believe the company could be resurrected by the remaining investors to protect their investments, the question becomes whether anyone in the industry would want to work with them.
If multiple vendors are suing to get paid for their inventory, then only the most desperate brands will take a chance or at minimum ask for cash payments upfront.
At some point, these investors will have to acknowledge their investments have zero value. MedMen will have burned even those who believed in the company.
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