Medmen Has Rumors of Bankruptcy

By: Infinity Broadcast Network
 
RIVERSIDE, Calif. - Jan. 29, 2020 - PRLog -- I'm Dr. D. and this is your weekly Market Insider Report. For those following my last few reports, I have focused primarily on the balance sheets of those companies listed in the North American Marijuana Index. The core focus has been cash liquidity as my predictions of a marijuana fallout for 2020 has already begun. This week, Medmen has been the primary target of bankruptcy rumors due to the capital burn rate versus their revenue growth. Things have gotten so bad, that Medmen is now offering stock to pay off vendor debt, in particular, its series B non voting stock. In addition, Medmen has laid off 40% of its workforce to save more money. Funny, though, there has been no mention of the leadership taking cuts to their salaries.

MedMen has had no choice but to slash costs as the reality of the market set in, including the cancellation of a planned $682 million all-stock acquisition of PharmaCann LLC. After Wall Street reacted poorly to the company's selling, general and administrative expenses line of roughly $100 million. Executives have put in place a plan to cut $70 million of operating expenses by March. The company is also quietly shopping around a license it owns in New York, which may be worth $50 million to $100 million, Hundley says. It's also selling non-core assets in Arizona and Illinois, and pulling back on capital expenditures and slowing down store construction, according to the company's filings with Canadian regulators.

In January, MedMen amended a $78 million loan that was due in 2020, to mature in 2022, though at a 15.5% coupon versus the 7.5% it had, and closed a $20 million stock offering of class B stock, which amounts to roughly 47 million shares.

People need to understand one aspect: There can be no bankruptcy filing to protect Medmen from creditors because the Federal Government, which governs bankruptcy law and procedure, doesn't recognize cannabis companies. Therefore, Medmen is stuck with the reality of selling off assets, trimming down costs, and paying off vendors with stock, so long as they accept it. I suppose it's possible that the stock can't get any worse, but then again, Medmen hasn't been the best at fiscal responsibility.

My guess is that Gotham Green Partners, which provided the $250 million convertible note, is holding Medmen's credit line hostage for failure to meet the defined minimum stock price threshholds. How Medmen will ever repay the Notes is beyond me. However, the Notes aren't due for almost 26 months, so only time will tell.

Written by Dr. Wise
https://youtu.be/ueX0teYgN0s

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Source:Infinity Broadcast Network
Email:***@infinitybrandsinc.com Email Verified
Tags:Cannabis
Industry:Financial
Location:Riverside - California - United States
Subject:Reports
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