Despite a rebound in the cannabis sector this week, MedMen stock continues to underperform, with a fall of 35% so far this week. In fact, in 2019 so far, shares of MedMen Enterprises (CSE:MMEN) (OTCQX:MMNFF) have lost almost 80% of their value and remain one of the worst performers in the sector.
Here’s a closer look at some of the factors impacting MedMen Enterprises.
Cash Burn
One of the most glaring problems about MedMen is the amount of cash burn that it has indulged in over the past quarters. For instance, in the fiscal fourth quarter of 2019, the company spent a whopping $83 million against revenue of $42 million. Most cannabis companies have not been profitable, but MedMen is spending far more than it brings in, and that has not gone down well with most MedMen stock investors.
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Additionally, the company is currently left with only $33.7 million in cash, and that is definitely a troublesome development. Moreover, MedMen Enterprises has paid its executives as much as $32.1 million in stock-related compensation, and that is definitely not going to sit well with many.
At the time of writing, MedMen stock is down 6% at $0.78 CAD.
Financing is a Headache
Financing remains a major problem for the company. If MedMen Enterprises had not been able to raise $280 million from Gotham Green Partners, then it would have struggled to survive as a continuing business. The company has often spoken about its plans to cut costs, but nothing has materialized from this.
Last but not least, it should also be noted that the company’s sales figures have not been rising at an acceptable rate. In the past quarter, sales grew by only 15%, and the failure to acquire PharmaCann should also prove to be a bit of a blow to investors. In such a situation, analysts feel that MedMen stock might not be the best stock to pick from among the cannabis stocks.
What do you think?
Featured image: Canva
