MedMen CEO Discusses Restructuring Efforts, Vendor Payment Issues
Adam Bierman wants investors to know that California-based MedMen Enterprises is still a "premier" cannabis brand, despite rumors to the contrary.
As reports began circulating that the financially-distressed marijuana firm was struggling to pay its vendors, Bierman, the co-founder and CEO of the high-profile dispensary chain, took to Reddit to conduct an AMA (ask me anything) in an attempt to quash concerns about the long-term health of the business.
“We are humbled by the relationships we have with these companies and understand how important we are to one another,” he wrote, responding to a Reddit user who asked about the company’s ability to maintain relationships with suppliers amid growing concerns of solvency.
“The trajectory of our industry is up but it’s not a straight line,” Bierman continued. “There have been times where we have been asked to extend partner like actions in order to support other companies at times and we are asking some of these businesses to now reciprocate.”
The decision to answer tough questions from a gauntlet of disgruntled shareholders and other observers likely came as a response to a string of tweets sent by Jason Spatafora, better known as the “Wolf of Weed Street.”
Last Friday, Spatafora began sharing screenshots of emails and text messages that indicated MedMen was unable to pay its vendors. Those messages spawned further speculation that MedMen was on the verge of filing for bankruptcy – a federal protection that marijuana businesses are not entitled to because cannabis is still a Schedule I controlled substance.
Nevertheless, Spatafora noted that MedMen could still consider entering into receivership in California while others wondered about the future of the embattled cannabis firm. MedMen recently embarked on a multi-pronged restructuring effort that includes selling assets, slashing jobs and slowing the pace of new dispensary openings, which fueled the speculation.
In an effort to combat additional conjecture prior to the AMA, Bierman spoke to The Green Market Report’s Debra Borchardt, confirming the validity of emails that were circulated online and showed a MedMen executive offering stock to vendors in exchange for debt forgiveness.
“Those emails are absolutely, real emails,” he told the outlet, noting that MedMen had retained FTI Consulting to manage accounts payable and help renegotiate payment terms with suppliers during the right-sizing.
“We are probably 30 days away from being out the other end of this restructuring,” Bierman told Green Market Report, adding that his company’s cash position was “very healthy,” and that its balance sheet was “strong.”
Those statements would appear to contradict the company’s actual financial situation, as well as the timelines outlined in the email signed by MedMen’s senior director Ben Schultz who offered vendors the opportunity to receive full reimbursement via a weekly payment plan that would be completed by March or April. According to the email, vendors also had the option to choose reduced value payments (.50 on the $1.00), which Schultz said could take four-to-six weeks to complete.
During his AMA, Bierman doubled down on the idea that MedMen was not at risk of going under, and pointed to the company’s “irreplaceable retail cannabis footprint” and “state-of-the-art customer loyalty and delivery platform” as proof.
“No amount of money could secure the locations we have today,” he wrote. “And we believe they are special locations.”
Bierman added that the information MedMen obtains from its “technology platform” gives the company a “competitive advantage” because it can to predict where, when and what its customers want to purchase.
“I do not, personally, believe the market appreciates the value of these achievements,” he wrote. “Or, if the market understands the value, there is a question around whether we will be around long enough as a company to enjoy the fruits. If we had continued doing business in the same way, the stock market might have ended up being right. But we evolved. And we are continuing to evolve and adapt to the new market reality.”
Bierman also used the AMA as an opportunity to update investors on the company’s restructuring progress.
“We have significantly cut costs, reduced corporate headcount, and are turning every stone to reduce costs and conserve capital,” he wrote. “I regret not implementing this cost cutting sooner. We have now made the necessary adjustments and are poised to thrive.”
Bierman even responded directly to Spatafora who asked about the vendor rumors.
“Through this restructuring we are fastidiously managing our cash position and we are working with our vendor partners on our existing AP and how most efficiently to pay those obligations,” he wrote.
The effort to offer greater transparency was commendable, but Biermen deflected on multiple occasions and many questions went unanswered. He stopped responding after about an hour, likening the whole experience to riding a roller coaster.
Before he logged off, Bierman did, however, offer a glimpse into trends across MedMen’s 30 stores in California, Nevada, Illinois, New York and Florida. Vape products make up 29% of sales, while flower makes up 23% of sales. Meanwhile, edibles and pre-rolls each make up 16% of sales, and concentrates account for 10% of sales.
MedMen will release its second quarter fiscal 2020 results on February 26, 2020. The company's stock has lost more than 25% of its value since the vendor emails were shared online last Friday. At the end of the trading day on January 24, 2020, shares of MedMen (OTC:MMNFF) were down more than 6%, to 0.44 cents. In October of 2018, MedMen shares climbed as high as $6.90