MedMen Stock May Fluctuate On $80m Gotham Green Advance

MedMen stock

Investors should expect MedMen stock to fluctuate on this one; MedMen Enterprises (CSE:MMEN)(OTCQX:MMNFF) announced earlier today that it has been advanced an additional $80 million from Gotham Green Partners.

The US cannabis retailer signed a deal with the private equity firm back in April, securing an investment worth $250 million.

Shares closed yesterday evening down 2.85% and selling for $2.39 USD. Will today see shares change at all?

MedMen Stock Declines on the News

According to the press release

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“MedMen has issued to the lenders additional convertible senior secured notes[…]with a conversion price per Subordinate Voting Share of the Company equal to US$3.29 per share”.

And further:

“The lenders have also been issued 10,399,851 share purchase warrants of the Company[…] The number of Warrants issued represents an approximate 50% Warrant coverage. The exercise price of 75% of such Warrants is US$3.718 per share, with the remaining 25% of such Warrants having an exercise price per share equal to US$4.29.”

It’s a potential that MedMen stock price will greatly fluctuate on this news. As the company gives more shares to Gotham Green, investors must worry for the dilution of theirs.

Raising Capital

The company reached out for the $250 million investment in order to fund general working capital.

But, for investors, this easily translates as; it needs capital and fast as it tries to cover its mounting losses. Recent financial statements showed that it risked running out of cash unless it raised money from somewhere. That’s where Gotham Green came in.

Fresh money buys MedMen more time, but MedMen stock has fallen over 60% already since late 2018. The company remains unprofitable as, according to the Motley Fool, it is “losing about $60 million every single quarter as it “invests” in growth”.

With further share dilution and no profits as of yet, investors are likely frustrated with management because MedMen’s actual sales have been good; $21.5 million good. But operating in some of the US biggest cannabis-loving states is not as straight forward as you may think. High taxes and dispensary restrictions mean a legal marijuana business is expensive to run.

Further, it is still competing with a far-cheaper black market that doesn’t have the additional costs akin to the legal sector—as such, product prices are far lower.

What do you think? How will MedMen stock react to this news? 

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