MedMen Co-Founder Adam Bierman Steps Down as CEO
Adam Bierman is out as the chief executive of MedMen Enterprises, the high-profile multi-state cannabis dispensary chain announced today.
In addition to stepping down from his position as CEO, Bierman will also relinquish all of his Class A super voting shares, leaving him with little control over the company he co-founded with business partner Andrew Modlin in 2010. Bierman will remain on the board of directors and continue to own a portion of the company's subordinate voting shares, according to a press release.
Meanwhile, Modlin, who last month agreed to delegate his voting shares to board chair Ben Rose for one year, will also surrender his Class A super voting shares.
The company has appointed Ryan Lissack, who serves as chief operating officer and chief technology officer, as interim CEO while it searches for a permanent replacement.
In the release, MedMen said its board of directors will form a special committee tasked with identifying and appointing a new CEO. The company will consider internal and external candidates, and may retain the services of a national recruitment firm.
“I continue to believe that MedMen is positioned to thrive,” Bierman said via the release. “It’s time for our next iteration of leadership to capitalize on the opportunity we have created. This has been an incredible journey and I will continue to be inspired by those around the globe working to make our world safer, healthier and happier through access to legal, regulated cannabis.”
Bierman’s departure comes at a time when the embattled California-based cannabis company has taken drastic measures to improve profitability. In recent months, the company has laid off upwards of 200 employees, divested assets in Arizona and Illinois, and called off a $682 million acquisition of PharmaCann.
Earlier this month, reports circulated that MedMen was struggling to pay vendors and offering stock in exchange for debt forgiveness.
In an interview with The Green Market Report, Bierman confirmed that the company had retained FTI Consulting to oversee accounts payable and assist with an aggressive restructuring plan.
“We are probably 30 days away from being out the other end of this restructuring,” Bierman said at the time.
Last Friday, Bierman also conducted a Reddit AMA to help assuage investor fears that the company was at risk of going under.
But instead of cooling concerns, Bierman merely fanned the flames of speculation as he dodged tough questions and abruptly signed off after about an hour.
A Seeking Alpha article entitled “MedMen Moves to Prevent Its Death” that was penned by the author “Winds Research” and published on Wednesday forecasts a rather gruesome future for MedMen.
“The quality of the MedMen's balance sheet has significantly deteriorated to the extent where the entire company is now under extreme stress,” the report reads.
According to the author, “MedMen's cash burn has placed the company of the precipice of bankruptcy.”
It’s worth noting, however, that marijuana businesses are not entitled to federal bankruptcy protections because cannabis is still a Schedule I controlled substance.
Meanwhile, Cowen analyst Viven Azer outlined some of the challenges MedMen has faced as it has attempted to scale its brand across multiple states.
“While the company has a dominant and recognizable brand in California, high costs have plagued the company, as they aimed to acquire premium real estate, and had excess staffing levels as they strived for a premium retail experience,” she wrote in a note to investors. “M&A to expand beyond the company’s home market also drove inefficiencies, as the company failed to drive top line growth last quarter outside of California.”
Nevertheless, Azer viewed today’s move as a positive.
“With restructuring underway, and with onerous financial commitments, we think the change is welcome,” she wrote in the note.
MedMen will release its second quarter fiscal 2020 results on February 26, 2020. The company's stock (OTC:MMNFF) jumped more than 9% on today’s news, however it is still trading at about 0.45 cents. In October of 2018, MedMen shares climbed as high as $6.90.
A press release with additional details is below.
MedMen Announces Leadership Change and Moves to Strengthen Governance
LOS ANGELES -- MedMen Enterprises Inc. (“MedMen” or the “Company”) (CSE: MMEN) (OTCQX: MMNFF) today announced that Adam Bierman, Co-Founder and Chief Executive Officer, has decided to step down as Chief Executive Officer of the Company effective February 1, 2020. The board of directors of the Company is in the process of forming a committee of directors that will be responsible for identifying and appointing a new CEO. The committee expects to consider internal and external candidates and may engage a national search firm to aid in its efforts. In the interim, the board of directors has named the Company’s Chief Operating Officer & Chief Technology Officer, Ryan Lissack, as Interim CEO. Mr. Bierman has agreed to continue to serve on the Company’s board of directors, including as part of the board to be elected at the Company’s upcoming shareholder meeting.
In addition, Mr. Bierman has agreed to surrender all of his Class A super voting shares (the “Super Voting Shares”) back to the Company. As previously announced in December, MedMen Co-Founder Andrew Modlin granted a proxy over all of his Super Voting Shares to the Company’s Executive Chairman, Ben Rose until December 2020. Mr. Modlin has also agreed to surrender all of his Super Voting Shares to the Company, which would occur upon the expiration of the proxy granted to Mr. Rose. As a result of the surrender of the Super Voting Shares, by the end of 2020, MedMen will have only one class of outstanding shares, the Class B subordinate voting shares (the “Subordinate Voting Shares”), each of which entitle the holder to one vote.
“The Board supports both Adam’s decision to step aside for a new CEO to lead the Company, and his and Andrew’s decision to surrender their voting rights to give all shareholders a stronger voice. This evolution will provide Adam the space to contribute to the future of MedMen and extend his commitment to the industry that he has helped pioneer,” said Executive Chairman Ben Rose.
“I continue to believe that MedMen is positioned to thrive. It’s time for our next iteration of leadership to capitalize on the opportunity we have created. This has been an incredible journey and I will continue to be inspired by those around the globe working to make our world safer, healthier and happier through access to legal, regulated cannabis,” said Adam Bierman.
The Company plans to release its financial results for the second quarter fiscal 2020 ended December 28, 2019 after market close on Wednesday, February 26, 2020. Following the release of these financial results, at 5:00 PM Eastern that same day, the Company will host a conference call and audio webcast with interim Chief Executive Officer, Ryan Lissack, and Chief Financial Officer, Zeeshan Hyder, to discuss the results in further detail.
Based on current holdings, after the elimination of the Super Voting Shares (a) Mr. Bierman will hold 1,893,047 Subordinate Voting Shares and 3,956,324 redeemable shares of MM CAN USA, Inc., each of which is redeemable for one Subordinate Voting Share, while Mr. Modlin will hold 2,091,065 Subordinate Voting Shares and 3,956,324 redeemable shares of MM CAN USA, Inc. Each of Mr. Bierman and Mr. Modlin hold 9,661,939 long-term incentive plan units issued by MedMen subsidiary MM Enterprises USA, LLC (the “LTIPs”) and that ultimately are convertible into Subordinate Voting Shares. On a partially diluted basis, and assuming that each LTIP converts into one Subordinate Voting Share, Mr. Bierman and Mr. Modlin beneficially own 4.8% and 4.9% respectively, of the Subordinate Voting Shares, being equivalent to 4.8% and 4.9% respectively of the votes attached to all MedMen securities after elimination of the Super Voting Shares.
The Company has agreed to compensate Mr. Bierman in connection with his departure and the surrender of all the Super Voting Shares by himself and Mr. Modlin. A special committee of independent directors will be formed after the Company’s next annual meeting of shareholders, currently scheduled for February 21, 2020. This special committee will have the mandate to obtain a third-party valuation of the Super Voting Shares and to consider if Mr. Bierman should receive additional compensation to that already received for his service to the Company in 2019. The Company has agreed to ensure that these determinations are made within 60 days of the shareholders meeting. The aggregate amount that is determined to be payable will be paid to Mr. Bierman in the form of securities, with 50% of the value to be paid in Subordinate Voting Shares and 50% of the value to be paid in the form of restricted stock units that are each convertible into Subordinate Voting Shares (“RSUs”). The precise number of Subordinate Voting Shares and RSUs will be determined using the 20-day volume weighted average price of the Subordinate Voting Shares at the date of issuance. The RSUs will have a 10-year term and will only be convertible if the daily volume weighted average price of the Subordinate Voting Shares is at least US$2.05 for 25 consecutive trading days.
The Company has also agreed to an amendment to Mr. Bierman’s LTIPs, such that they will not vest as a result of his departure, which, as a result of the current price of the Subordinate Voting Shares, would have resulted in Mr. Bierman receiving no Subordinate Voting Shares. The LTIPs will now continue to be outstanding and vest upon the price for the Subordinate Voting Shares achieving the previously announced thresholds of C$10, C$15 and C$20, and will now also vest on a change of control of the Company.
The surrender of Mr. Bierman and Mr. Modlin’s Super Voting Shares are subject to final consent from Stable Road Capital and its affiliates, one of the Company’s secured lenders.
Founded in 2010, MedMen is North America’s premium cannabis retailer. Founders Adam Bierman and Andrew Modlin have defined the next generation discovery platform for cannabis and all its benefits. A robust selection of high-quality products, including MedMen-owned brands [statemade], LuxLyte and MedMen Red, coupled with a team of cannabis-educated associates cement the Company’s commitment to providing an unparalleled experience. MedMen’s industry-leading technology enables a fully compliant, owned-and-operated delivery service and MedMen Buds, a nationwide loyalty program. MedMen believes that a world where cannabis is legal and regulated is safer, healthier and happier. Learn more at www.MedMen.com
Source: MedMen Enterprises
Cautionary Note Regarding Forward-Looking Information and Statements:
This press release contains certain “forward-looking information” within the meaning of applicable Canadian securities legislation and may also contain statements that may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Such forward-looking information and forward-looking statements are not representative of historical facts or information or current condition, but instead represent only MedMen’s beliefs regarding future events, plans or objectives, many of which, by their nature, are inherently uncertain and outside of MedMen’s control. Generally, such forward-looking information or forward-looking statements can be identified by the use of forward-looking terminology such as “target of”, “objectives”, “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or may contain statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “will continue”, “will occur” or “will be achieved”. This forward-looking information is based on certain assumptions made by management and other factors used by management in developing such information.