Culver City Cannabis RetailerMedMen Enterprises Inc. has come a long, down-trending way since its early days as the quintessential cannabis unicorn — a reality that has led the company and its interim chief executive to go all in on a restructuring.

Interim Chief Executive Michael Serruya is the company’s third top leader in two years, succeeding Tom Lynch last November. Lynch was credited as the leader of MedMen’s turnaround efforts and the company’s transition into what Serruya called “MedMen 2.0” in a statement. Serruya joined MedMen’s board of directors in August last year via a $100 million investment in the company from Serruya Private Equity Inc.

MedMen’s market cap is currently $154 million based on a stock price that has slid from 29 cents a share to 12 cents in the last year on the over-the-counter market, a far cry from the days in 2018 when shares peaked at $6.49.

MedMen is a vertically integrated cannabis company with operations in cultivation, manufacturing and retail. It has 31 stores in California, New York, Nevada, Illinois, Massachusetts and Arizona. It started in 2010, originally focusing on the medical market. Representatives of MedMen did not respond to requests for an interview from the Business Journal.

Trials and tribulations

Like his predecessors, Serruya is contending with a company that has experienced plenty of obstacles, such as a revolving door of C-level positions that most recently saw the resignation of MedMen’s former chief revenue officer, Tracy McCourt.

The company has also dealt with mounting losses and lawsuits, some of which involve former executives like former chief financial officer James Parker. He filed suit against MedMen in 2019, alleging wrongful termination, breach of contract and retaliation. Parker sought $20 million in damages for the alleged wrongdoings. However, MedMen came out on top of the suit.

MedMen will utilize this … grace period to realize fair market
value for … assets.
MICHAEL SERRUYA
MedMen

“The false allegations brought by Mr. Parker have grossly misrepresented the environment at MedMen in 2018, and certainly bear no resemblance to the MedMen before us today,” Serruya, said in a statement. “We are pleased to put this chapter to rest and focus wholly on taking this company to the next level —leveraging the strength of the MedMen brand and consumer experience to expand across the United States, Canada and internationally.”

MedMen’s march forward into becoming an improved business remains an uphill battle. It is currently embroiled in a legal battle with Ascend Wellness Holdings Inc. over a $73 million investment agreement that was terminated by MedMen in January.

In response to Ascend’s claim that it did not fulfill a contract to transfer $73 million in New York licensed operations, MedMen counterclaimed and accused Ascend of pressuring Gov. Kathy Hochul’s administration to try and approve a medical marijuana license transfer between both companies. MedMen’s allegations were withdrawn following evidence from Ascend’s counsel that conflicted with its counterclaim. The case has yet to be concluded.

MedMen is still kicking despite numerous challenges and is investing its resources into continuing reconstruction efforts and adding to its retail presence in the United States.

Shedding weight

The company recently had a $114 million commercial loan agreement tagged with a six-month extension. “MedMen will utilize this six-month grace period to realize fair value for significant assets that are no longer core to our market strategy,” Serruya said in a statement. “We have a longstanding relationship with our lenders and appreciate their support as we execute against an evolved business plan.”

One example of asset-shedding strategy is in Florida, where the company announced in February that it plans to sell all of its Florida-based assets to Green Sentry Holdings LLC for $83 million. The assets include inventory, dispensaries, cultivation operations and the company’s license. The deal is expected to close in late April or early May, according to a statement.

In its first fiscal quarter of 2022, ending Sept. 25, 2021, the company reported that its first quarter revenue from continuing operations was $39.8 million, an increase of 13.4% from the same quarter the previous year.
“The past quarter we were able to deliver solid increases in year-over-year revenue despite sequential softening in the overall macro environment,” Tom Lynch, MedMen’s former chairman and chief executive said in a statement. “On the top-line, we outperformed Headset industry data in the majority of our markets, and we generated positive retail adjusted EBITDA for the fifth consecutive quarter.”

One of the most notable developments to occur during the first quarter was the acquisition of a majority of the outstanding senior secured convertible notes and warrants of MedMen by cannabis pharmaceutical and research company Tilray, as well as entities associated with Serruya Private Equity.
Tilray’s acquisition of 75% of MedMen’s outstanding secured convertible notes and 65% of the outstanding warrants provide MedMen with the chance “to execute on its growth priorities and explore additional strategic opportunities,” according to the company.

Tilray said in a statement that the nearly $166 million deal would give it a domestic retail footprint if cannabis is federally legalized, a move that would also stand to benefit MedMen, which is looking to expand in markets such as Massachusetts, Illinois, Arizona and California.
Serruya said that MedMen’s strategy moving forward will be to include an “asset-light model” that the company believes can bring strong financial results and growth opportunities across several states.