MedMen, a chain of cannabis stores that was once described as the “Apple Store of weed” and valued as high as $1.65 billion as a public company, is near financial collapse, according to a regulatory filing
MedMen was the hottest cannabis store in California when the state’s recreational pot market opened in 2018.
The retail chain called itself the “Apple Store of weed” and national media outlets, from Esquire to Vanity Fair, hailed this California pot company as the upscale future of legal pot. Before long, MedMen had opened locations in seven states and even expanded to Manhattan.
But now MedMen’s empire is on the verge of financial failure.
The company has over $137 million more in debt than assets with only $15 million of cash on hand, according to a financial disclosure released last week. MedMen said in its disclosure that there was “substantial doubt” as to whether it can pay its bills for the next year.
MedMen has more than 700 employees and is headquartered near Los Angeles, according to its annual filing last year. It has 23 stores across the country in six states (it withdrew from Florida last August), and three locations in the Bay Area, in San Jose, San Francisco and Emeryville. The company did not respond to SFGATE’s request for comment.
MedMen went public on the Canadian stock exchange in 2018, raising $110 million at an evaluation of $1.65 billion. The stock was trading at more than $6 a share in 2018, but it’s now worth less than $0.04.
Priya Sopori, a cannabis attorney based in Los Angeles, said MedMen’s value as a business has been “hotly disputed” for many years.
“I think there was significant disagreement as to whether or not MedMen was worth what MedMen said it was worth,” Sopori told SFGATE. “In many ways I think we’re seeing the consequences of those valuations from years ago.”
MedMen’s financial disclosure is only the latest warning sign that California’s cannabis economy is struggling, with many companies close to out of business. Expensive regulations and high taxes are combining with crashing wholesale prices to make it almost impossible to make a profit in the legal industry.
Debt has become a particularly big problem for the state’s industry. California law allows distributors and retailers to buy cannabis on credit with an agreement to pay the supplier back in the future. But many retailers are not paying these debts, according to Brett Gelfand, the managing partner of CannaBiz Collects, a cannabis-focused debt collection agency.
“We’re seeing the same debtors over and over again. Sometimes we have 20 different clients submitting their claims against the same debtor, so the debtor is drowning in debt,” Gelfand said.
Gelfand estimated that 80% of his business comes from California and “the last 6 to 9 months are the busiest times ever we’ve seen” in the state. He said it can be almost impossible for companies to get fully repaid by retailers who have run up high levels of debt, whom he called “problem children.”
“In California, with the problem children, getting paid in full has become uncommon, very rare,” Gelfand said. “They’re probably going to go out of business, they have big egos, and they’re not going to pay their bills. Those are the debtors that are going to get weeded out this year, they’re going out of business all the time.”
One insider told Green Market Report that he estimated that half of California’s cannabis retailers will go out of business this year because of debt problems. Gelfand said he was actually optimistic about 2023, because now most of the bad operators have already gone under or others are teetering on the verge of a collapse.
