MedMen stock has been under pressure recently following distressing news about MedMen Enterprises’ (CSE:MMEN) (OTCQX:MMNFF) financial profile. MMEN stock has fallen more than 12% in the past week from a high of $4.62 CAD. In Monday’s session, the stock is down about 2% to $4.02 CAD.
MedMen Stock ‘Living’ Above Its Means
The cannabis industry-leader is racing to raise funds to save its operations from an inherent nose-dive. In a financial report released last month, MedMen revealed that “at [its] current operating level, [it] will not have sufficient funds generated from operations to cover [its] short-term and long-term operational needs.”
The company recently secured a $100 million loan from cannabis industry lender Gotham Green Partners. Although MedMed announced that the funds will be used to finance its expansion to Florida and other locations, it is only natural that the funds will also be going to salvage the financial crisis at hand, even if only temporarily. Moreover, Gotham promised to extend MedMen another loan of $150 million but only if its stock improves.
Is the Latest Funding Enough for MedMen?
Although the company has secured its near-term cash position, it’s important for investors to know that this could just be a way of diluting shareholders. As noted in MedMen’s press release:
“All or a portion of the Notes (including all accrued interest thereon) will be convertible, at the option of the holder, into Class B subordinate voting shares of the Company at any time prior to the close of business on the last business day immediately preceding the Maturity Date.”
One should also take note that the company’s new capital infusion of $250 million may not last that long. This amount may look like a big investment figure in the cannabis industry, but expanding further retail locations and making acquisitions have been eating up MedMen’s capital at a growing pace.
MedMen stock has shrunk nearly 60% since October last year, shaving its market value down to approximately $2 billion. In a bid to temporarily alleviate the crisis, MedMen agreed to sell off a section of its property for about $100 million in January.
Do you think MedMen Enterprises can recover from here?
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