Cannabis Company MedMen Goes Bankrupt With $411 Million In Liabilities – Forbes

WEST HOLLYWOOD, CA – JANUARY 02: A processor (R) fills orders for bud tenders (L) who sell the … [+] product at MedMen, one of the two Los Angeles area pot shops that began selling marijuana for recreational use under the new California marijuana law today, on January 2, 2018 in West Hollywood, California. Los Angeles and other nearby cities outside of West Hollywood have not finalized their local permitting rules so licenses to businesses in those jurisdictions are yet to be granted. (Photo by David McNew/Getty Images)
Multistate cannabis company MedMen leaves the industry by filing bankruptcy proceedings in Canada with about $411 million in liabilities.
MedMen announced on April 26 that it filed for bankruptcy under Canada’s Bankruptcy and Insolvency Act on April 24. The business advisory firm B. Riley Farber Inc. was appointed as the company’s bankruptcy trustee.
The company also announced that its American subsidiary based in California entered receivership in the Los Angeles Superior Court on April 23 for the organized dissolution and liquidation of its assets.
As a result of these receivership proceedings, MedMen’s subsidiaries will have their operations and assets dissolved or sold off in compliance with U.S. laws.
While MedMen’s Chief Financial Officer, Amit Pandey, resigned effective on February 13, each of the company’s directors resigned immediately before the commencement of the bankruptcy proceedings.
The decision to cease operations and file for bankruptcy and receivership came after assessing MedMen’s and its subsidiaries’ financial condition, failure to meet financial obligations, and expected actions of secured creditors.
“The difficult decision to shut down operations and commence the Bankruptcy Proceedings and Receivership Proceedings was made after careful consideration of the current financial condition of the Company and its subsidiaries, their inability to pay their liabilities as they become due and the anticipated enforcement actions of secured creditors. After careful consideration of these factors and in the absence of other available alternatives, the board of directors of the Company determined that it was in the best interests of the Company to proceed with the commencement of the Bankruptcy Proceedings and Receivership Proceedings,” the company’s press release reads.
MedMen operates in multiple states with retail stores and cultivation facilities. It traded on the Canadian Securities Exchange (MMEN) and over the counter in the U.S. (MMNFF).
Founded in 2010 by Adam Bierman and Andrew Modlin, it expanded rapidly, opening stores in several U.S. states.
Before going public in 2018, MedMen raised $110 million and later secured additional funding.
However, rumors of MedMen’s potential failure circulated online for years.
MedMen encountered numerous challenges, including financial mismanagement resulting from rapid expansion, leading to significant debt accumulation and profit difficulties. Legal disputes, particularly regarding labor practices, exacerbated financial strains and attracted public scrutiny. Corporate governance concerns and market volatility further compounded the company’s troubles, alongside regulatory compliance issues and persistent cash flow problems. Negative publicity surrounding internal conflicts and executive departures also impacted MedMen’s reputation, diminishing investor confidence and complicating its recovery trajectory.
For instance, MedMen appointed more than five CEOs only in the last few years.
In 2023, the Green Market Report brought attention to MedMen’s substantial financial hurdles, revealing a $137 million debt with only $15 million in cash and equivalents. The company’s fiscal second-quarter earnings unveiled a working capital deficit, raising concerns about meeting obligations for the coming year. Despite Medmen’s attempts to cut costs, it experienced a significant decline in total revenue.
In January, MedMen’s stock price dwindles to zero. In the same month, MJBizDaily reported that MedMen implemented a series of layoffs.
As reported by Market Watch, despite facing accumulated losses, legal disputes, workforce reductions, and intense competition, cannabis company Tilray, along with Gotham Green Partners and other investors, announced in 2021 plans to purchase $166 million in convertible debt and warrants from MedMen, contingent on U.S. cannabis legalization. If legalized, the debt would convert to a 26% stake in MedMen shares by August 16, 2028. Tilray’s involvement was facilitated through a noncontrolling interest in Superhero Acquisition LP, which is focused on maximizing the value of its stake in MedMen by enhancing its assets, including stores and intellectual property.
Richard Ormond, the Chief Restructuring Officer at MedMen, did not provide a response to a request for comment.