MedMen falls short on making payments to vendors

Published Feb 8, 2020 12:00 p.m. ET
iStock / p_saranya

Year two of legalization in Canada is raising the hopes of millions, but some of the industry's biggest and most popular players are having trouble with paying their bills. Though it might come as a shock to anyone who hasn’t been keeping up with cannabis stocks, the legal market isn’t fairing so well, and the fallout from this past year’s failures are beginning to show through some of the largest cannabis companies announcing massive layoffs and closures to start off the new year.

MedMen problems

MedMed Enterprises had a running head start and appeared to be making leaps and bounds as their popularity grew within the cannabis industry and with consumers. They’ve opened an incredibly successful dispensary in Beverly Hills that was featured on South Park and made a name for themselves, but times are growing tougher, and MedMen Enterprises has had to take drastic action to reduce cost in an attempt to stay successful.

Some of the most recent changes include a significant sale of MedMen Stock, layoffs that included hundreds of employees, many of which were only with the company for a year or less, and last but not least, they paused payments to vendors who still today, continue to sell their products across the country. MedMen may be experiencing some financial woes, but they do have a plan in place to pay off their debt.

Goals

MedMen isn’t running from its vendors. It’s merely plotting out a plan with the assistance of a business advisory agency to effectively and swiftly pay off any outstanding debts to both regulating agencies and vendors. Unfortunately, it looks like not everyone is going to be receiving a cash payment, as it has been implied that the agency is recommending exchanging MedMen stock to settle with companies that are awaiting payment.

Money problems across the cannabis industry

MedMen has been hit especially hard, but they aren’t alone in this struggle to stay relevant and successful in an industry that has been ravaged by strict regulations and sky-high prices. As any responsible company would, MedMen has started a restructuring process that trims the fat and keeps the company afloat during difficult times.

It’s not uncommon for a business to pause payments to vendors as they seek further financial advice, and this reveal doesn’t mean that the world-famous company is going anywhere anytime soon. In fact, the way that they have chosen to protect themselves might be the only thing that ensures their survival, and other big industry players have either done the same thing or will soon be following suit.

Until the Canadians government relaxes rules surrounding the sale of cannabis products, these big cannabis industry companies have no real way to stay profitable, as the black market eats up more than 75% of the available revenue from consumers. So until then, announcements like this one from MedMen will dominate headlines, with only the strongest and most financially savvy surviving such turbulent times.

MedMen Stock

Though MedMen stock was one of the first to make bank, thanks to an influx of willing investors, prices have dropped consistently, leading some experts to recommend selling, but long term stock market players are holding vigilant as they await the bigger payoff further down the road. Announcements like this one are unfortunate, but MedMen still remains one of the most popular and successful companies in the industry.

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