MedMen Stock Continues to Tank as Financial Woes Deepen

MedMen stock

MedMen stock is continuing to fall this week in the aftermath of MedMen Enterprises (CSE:MMEN) (OTCQX:MMNFF) posting underwhelming quarterly results last week, despite continuing its retail expansion in Florida.

Poor Results Continue to Weigh on MedMen Stock

MedMen Enterprises reported its Q1 fiscal 2020 results on November 28, with gross profit after adjustments coming in at $17.2 million USD, while revenue clocked in at $43.9 million USD, which was well short of the expected figure of $47.7 million USD. That revenue miss is particularly glaring when the $66.1 million USD on expenses is accounted for. MedMen stock has fallen 8.5% since those results were published last week.

During 2019, MedMen Enterprises has undertaken an aggressive expansion strategy in Florida, with the opening of several new stores in the Sunshine State despite recreational cannabis still being outlawed there. With revenue falling 5% in the most recent quarter, that expansion strategy is yet to bear fruit as investors in MedMen stock grow increasingly concerned about the company's financial position. The lack of top-line revenue growth looks extremely concerning for shareholders, as that implies existing stores are not posting strong organic growth.

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PharmaCann Termination

The termination of MedMen's proposed takeover of private cannabis firm PharmaCann looks to be a significant moment for MedMen stock performance in 2019. MedMen Enterprises initially announced the all-stock takeover of PharmaCann on Christmas Eve last year, and the deal appeared to be nearing completion in September following the expiration of the waiting period. However, on October 8, the company pulled the plug on the deal, citing a variety of reasons, including market underperformance and regulatory hurdles.

Since that deal was canceled almost two months ago, MedMen stock has collapsed over 75% after the company agreed to forgive approximately $21 million USD in debt in exchange for the transfer of assets relating to three entities. Those entities include a cultivation and production facility and a separate retail location in Illinois, as well as a retail license for Greater Chicago and another license for a facility in Virginia, two states where recreational cannabis remains illegal.

MedMen stock is currently trading for $0.54, having lost nearly 90% of its value in the year to date.

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