It’s true: we do enjoy kicking MedMen (MMEN.C) around.
Why do we dislike this grotesquely unprofitable company so intensely?
Because Adam Bierman (CEO) and Andrew Modlin (President) are greedy.
Not – “I-fly-1st-class-and-pay-my-workers-minimum-wage” greedy.
Not – “I-cheat-on-my-taxes” greedy.
Not – “I’m-unloading-cheap-paper-through-a-numbered-company” greedy.
Crazy, almost psychopathically greedy.
We dislike them for the same reason we dislike Namaste’s ex-CEO, Sean Dollinger – another extravagantly gifted salesman with a tenuous grasp on the truth.
Make no mistake, if you are a MedMen shareholder, Bierman and Modlin have already taken your money and put it in their pockets – or – if you came late to the game – they are about to.
This is not your first warning.
On February 17, 2019, we wrote, “MedMen (MMEN.C) financials show another $60m+ loss.”
“MedMen executives have been micro-dosing human feces into the news-flow for so long, with such guile,” we wrote, “that MMEN shareholders are now fully acclimatised to the taste of shit.”
On April 15, 2019 MedMen released preliminary Q3, 2019 systemwide revenue results.
“Revenue results” – are not the same as financials.
The format allows you to talk about the money you are taking in, but say nothing about what you are doing with that money.
For the fiscal Q3, 2019 ending March 30, 2019, “across operations in California, Nevada, New York, Arizona and Illinois”, revenue was CND $48.8 million – 22% higher than the same period last year.
Systemwide “pro forma” revenues – which includes “pending acquisitions” was CND $73.2 million for the quarter.
Gross margin across its retail operations was 51%, compared to 53% in the previous quarter.
Gross margin is net-sales-revenue minus cost-of-goods.
By comparison, Lululemon (LULU.NASDAQ) had a 2018 gross margin of 56%, that year Apple (APPL.NASDAQ) had a gross margin of 38% and Tesla (TLSA.NASDAQ) had a gross margin of 20%.
In addition to growing revenue at its existing locations, MedMen has 16 new locations slated to open in 2019, including 12 stores in Florida.
Normally, for a young company with a market cap of $361 million, $48 million quarterly revenue and a gross margin of 51% – would be good news.
The problem here is that the structure and the voting shares of the company are rigged so that Bierman and Modlin can take those revenues and shove it in their own pockets.
That is exactly what they did last quarter.
There’s nothing you can do about it.
You can’t fire them.
You can’t get your money back.
We warned you.
MedMen (MMEN.C) goes public Tuesday, but three executives will make most of the money on the deal – Equity.Guru
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“Adam Bierman is the size of a baseball middle infielder, a position he used to play in college,” reported Rolling Stone Magazine in a lengthy well-written April 16, 2019 article penned by Stephen Rodrick.
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“His brash style has been a boost and a bust for MedMen.”
“He talks of a future where MedMen is doing $1 billion in business, wait, make it $1.5 billion, no, $2 billion. Bierman asks who in the room is the most recent hire. A man raises his hand. He is Employee #2,209. Bierman smiles. “Can you imagine how great it would be to be Employee #2,209 at Amazon?”
The Rolling Stone article rehashes past MedMen scandals, covered by Equity Guru including the ex-CFO’s claim that Bierman is a bully, a liar, a sexist and a racist.
“Bierman calls the claims ‘complete garbage,’ maintaining that Modlin is openly gay and that his wife is Latina, so accusations of bigotry don’t make sense.”
Rodrick describes Bierman’s schtick as “equal parts creation story and revivalist tent show.”
According to the article, “MedMen’s bets – specifically in Florida, New York and Illinois – are educated risks that could either make or bankrupt the company.”
Rodrick describes Bierman as “a fidgety sort” who specialises in “seize-the-day rhetoric” and has a “disarmingly mellow vibe” which “hides a sharp mind.”
“Cannabis has helped me take it to another level,” says Bierman, who has two hits when he gets home. “It allows me to reset. I’m present, and I’m appreciative of the fact that I have 30 quality minutes with my wife.” Later, he adds more positivity: “My tokes add no calories to my day.”
“All of the white noise is making investors nervous,” wrote Rodrick, “Cannacord, a venture-capital firm with a MedMen stake, unloaded nearly $14 million in stock after the CFO lawsuit.”
“We’ve been real and authentic,” countered Bierman. “The one thing we’ve never done is manage the stock price because that wouldn’t be authentic.”
Investor alert: never in the history of the world has an authentic individual seen fit to remind people of his/her authenticity.
MedMen recently announced a $100 million investment from Gotham Green Partners, with another $150 million bump if MedMen hits certain milestones.
“I no longer see this company as a company that has a binary-state-outcome potential of failure or success,” Bierman told Rodrick. “We’re past that.”
If you say so.
In Q1, 2019 MedMen reported a net loss of $66.5 million. On p. 57 of the consolidated statements, it mentions in passing that “Key Management Compensation” for the quarter is $21 million.
MedMen anticipates posting full Q3, 2019 fiscal results in May 2019.
You can expect another loss.
If you want to know how big, search the Q3 fiscals for the phrase, “Key Management Compensation.”
That will tell the story.
“Investors don’t want the CEO of a newly public company worried about paying his mortgage,” Bierman told Rolling Stone somewhat ominously.
Full Disclosure: Equity Guru has no financial relationship with MedMen.Disclaimer: ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.