MedMen Collapse Reveals Challenges on Both Sides of Border
Cannabis companies in Canada have long commented on how strict regulations and taxation have become a burden on the cannabis industry. But the MedMen collapse reveals that it’s not a Canada-only problem. The company, once valued at $1.7 billion (US), is on “the verge of collapse” according to SFGate. (See link to article below.)
What’s worse, it could be just the tip of the iceberg for California’s cannabis industry. Expensive regulations, plummeting prices, and competition from illegal operators are all being blamed.
At its height, MedMen was dubbed the “Apple Store of weed” and quickly expanded from California to seven US states including stores in Florida and Manhattan. They contracted almost as quickly as debt started to overwhelm the company.
However, there are those who say the MedMen collapse was almost inevitable due to its impossibly high valuations. Cannabis attorney Priya Sopori, based in Los Angeles, underlined that the company’s actual value was “hotly disputed” for years.
“I think there was significant disagreement as to whether or not MedMen was worth what MedMen said it was worth,” Sopori told SFGate. “In many ways I think we’re seeing the consequences of those valuations from years ago.”
MedMen traded at a high of $8.50 (CAD) on October 19, 2018 – two days after cannabis legalization in Canada. On February 8, 2023 it closed on the Canadian Securities Exchange at $0.035 with $15 million (US) cash on hand and debts of $153 million. The company admitted that it had “substantial doubt” it could pay its bills for the next year.
MedMen Collapse a Microcosm of Things to Come – LPC
According to Brett Gelfand, managing partner of CannaBiz Collects, a cannabis-focused debt collection agency, the MedMen collapse represents the norm, not the exception in California. He estimates 80 per cent of his business comes from landlords and suppliers in California, and that the last six to nine months are the busiest he’s seen.
“In California, with the problem children (what Gelfand calls the worst debtors), getting paid in full has become uncommon, very rare,” Gelfand said. “They’re probably going to go out of business, they have big egos, and they’re not going to pay their bills. Those are the debtors that are going to get weeded out this year, they’re going out of business all the time.”
He said that the Green Market Report, which estimated half of California’s cannabis retailers will go out of business this year due to debt, might be behind the news. He’s optimistic about 2023 because many have already gone under.
Boom and bust cycles in new industries are not new. But it is perhaps the suddenness in California that caught many off guard. And, it’s interesting that the reasons behind the MedMen collapse and other failing cannabis retailers are very similar to Canada’s cannabis crisis. The Canadian cannabis industry has needed fixing for a while now, which is something that can only come with government reform. Here’s hoping those reforms come soon.
Read the original article at SFGate
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