MedMen stock is tanking today after MedMen Enterprises (CSE:MMEN) (OTCQX:MMNFF) announced plans to lay off over 190 staff as part of its efforts to reduce spending, adding further misery to the cannabis market, which has been rocked by news of major layoffs in recent weeks.
Can Cost Cutting Save MedMen Stock?
The reduction in staff is part of an overall plan to help generate positive EBITDA for the embattled cannabis firm. Of the 190 staff being let go, 80 of those are in corporate positions, which is 20% of the overall corporate staff. This will help generate savings of approximately $10 million USD per annum, while spending on marketing and technology will be cut by $20 million USD. Last year, the company spent $244 million USD on general and administrative expenses and $27.5 million USD on sales and marketing. MedMen stock is down over 20% on Monday.
The cash-strapped cannabis company has also said that it is exploring the sale of “certain operations and licenses in states that are currently deemed not critical to the company’s retail footprint.” The company’s co-founder and CEO Adam Bierman defended the job cuts in an interview with Bloomberg, saying, “We find ourselves in the exact same spot as all of the other competitors across the industry, where nobody’s fully funded because everybody’s been living in this high-growth phase.”
Issues with MedMen Enterprises’ cash position first became apparent in early October when the company announced it was pulling out of a deal to purchase private pot firm PharmaCann. MedMen shares have dropped over 50% in the proceeding weeks, and those losses don’t look to be slowing any time soon.
One possible salvation for MedMen stock could come from recreational legalization in Florida, where the company is a leading retailer and strong proponent of further legislation. MedMen Enterprises is a prominent member of the Make It Legal Flordia campaign, which is pushing for a 2020 ballot to pass an adult-use cannabis amendment. However, that campaign is still at least a year away from achieving its goal, and the near-term future looks increasingly rocky for MedMen and its investors.
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