MedMen–California’s first cannabis company to be valued at over a billion dollars–has filed for bankruptcy in Canada, the company announced April 26.
Mounting debt buried the Los Angeles-based cannabis retailer three years after it was valued at over $3 billion, according to its filing.
“The difficult decision to shut down operations and commence the Bankruptcy Proceedings and Receivership Proceedings was made after careful consideration of the current financial condition of the Company and its subsidiaries, their inability to pay their liabilities as they become due and the anticipated enforcement actions of secured creditors,” the company said in a news release Friday.
According to MedMen’s announcement, it had no other available alternatives but to seek bankruptcy protection. The board of directors determined it was in the best interests of the company to begin the proceedings.
Filing for bankruptcy protection in Canada can be useful for some U.S. cannabis companies who don’t have access to Chapter 11 bankruptcy protection because maijuana is federally illegal, according to MJ Biz Daily, a cannabis industry online news publication.
Before hitting financial hardship during the COVID-19 pandemic in 2020, MedMen operated 25 retail locations in seven states—California, Florida, Nevada, Illinois, New York, Massachusetts, and Arizona, according to the company’s 2020 report filed with the Securities and Exchange Commission. It ended 2019 with 1,300 employees.
The company was placed into receivership in the Los Angeles Superior Court in Santa Monica to dissolve and liquidate its California assets, according to the news release.
Most of MedMen’s executive leadership has departed. Amit Pandey resigned as the company’s chief financial officer in February.
The company could not be reached for comment.
MedMen reported it had $410 million in debt, according to SF Gate, a San Francisco-area news organization.
The company’s shares are expected to be delisted and haven’t been traded for several weeks, according to the announcement.
MedMen began its downward spiral during the pandemic when it began accumulating a mountain of debt. Its shares were downgraded in January and had zero value, according to the Green Market Report, which provides financial news about the cannabis industry.
The company spent the past two years selling off assets in Nevada and elsewhere to recoup some of the debt, but the sales don’t appear to have been enough to keep the company afloat.
It also began closing many of its California stores this year, offering deep discounts on remaining products.
Med Men’s financial troubles are a sign that California’s projections were wrong about cannabis demand in the state, said Jerred Kiloh, president of the United Cannabis Business Association, a cannabis retailer association in California.
“How can a $3 billion company turn into absolutely nothing in the California market?” Mr. Kiloh told The Epoch Times.
Med Men was fully funded and had high-profile contributors “at every level,” he added.
“[The state] was so wrong, and now we have to readjust,” Mr. Kiloh said. “The reality is, if a company that large, with this much demand in the state, can’t survive, how do you expect the rest of us to?”
More retailers are expected to follow as financial opportunities in California dry up, Mr. Kiloh said.
Out-of-control regulations and high taxes are making the market “unsustainable at every level,” he said. “We are taxing it higher and regulating it more than any other business I’ve ever seen.”
The state’s cannabis licensing has been backed up for years. A recent state audit also found the system had many holes that left the door open for corruption.
Mr. Kiloh has tried to get a license for retail sales since January 2018, he said, and more than 80 percent of state licenses are still provisional.
“The state isn’t leading in a way that would make locals feel [they had] a pathway to success,” Mr. Kiloh said. “People are just leaving.”
MedMen is the latest retailer in California’s troubled cannabis industry to close its doors.
On March 25, High Times Holding Co., the publisher of the recreational marijuana magazine, and other media brands, suddenly walked away from its 13 dispensaries owned in the state.
Cannabis operations in Blythe, San Bernardino, and Coalinga were permanently closed after months of failing to pay taxes, rent, and health insurance premiums, according to employees and other reports noted by CRB Monitor, an online database for the cannabis and marijuana banking industry.
To add to the legal industry’s woes, cartels are taking over land in much of California’s rural counties while the black market expands and thrives.
Siskiyou County Sheriff Jeremiah LaRue told Epoch Times’s California Insider in February, illegal marijuana grows are out of control.
“If you see the pictures, if you see the video, it looks like a third-world country,” Mr. LaRue said. “The crime is off the charts. We have people getting murdered at marijuana grows.”
