MedMen Enterprises Inc (CSE:MMEN) is going through a lot of turmoil these days. Not only is The Company burning through lots of cash and is facing a lawsuit from its ex-CFO, but now it’s seeing some important members of its team depart. In an ‘executive management update’ released by MedMen on Friday, it announced multiple departures. Chief Operating Officer Ben Cook along with General Counsel Lisa Sergi had resigned from The Company. There was also an undisclosed member of the Board of Directors that was leaving as well.
But that’s not all. According to CNBC, Senior Vice President of Corporate Communication Daniel Yi has also resigned. That one is the most surprising as Yi has often represented The Company and has almost been what I’d consider to be the face of MedMen. It would be very odd to not have his name mentioned somewhere in the release as well given his importance. CNBC also noted that other staff were also let go from the design and technology teams.
Layoffs are one thing, but any time you see a departure of high-ranking officials, especially around the same time, it’s generally not a good sign that things are going well. Even the departure of one high-ranking executive can often be enough to send a stock into a tailspin, let alone mule multiple. With the markets not being open on Friday, we’ll have to wait and see what kind of a reaction the markets have to the news. Year to date, MedMen has been very volatile and it was up a modest 4.7% as of the end of last week.
Is the stock in trouble?
Marijuana stocks, for the most part, have been off to strong starts to 2019. Rival Trulieve Cannabis Corp (CSE:TRUL) has risen by 75% since the start of the year and other cannabis stocks have had comparable returns as well.
There’s clearly some concern from investors as MedMen has had no shortage of drama so far this year. And as much as The Company may dismiss concerns of reckless spending, the problem is that the numbers don’t lie. MedMen is burning through lots of cash and strong sales growth has not been enough to pull The Company anywhere near profitability. In its most recent quarter, MedMen recorded a significant $62 million loss from its operations. That’s more than double its sales, and only for 13 weeks.
When we look at the totality of all these events – executive departures, a lawsuit, and significant losses and cash burn – it would be a stretch to say that things are going well. While MedMen has a lot of opportunities to grow, especially as cannabis legalization continues to make progress across the U.S., it could find it challenging to do so if these problems persist. Even issuing shares to raise money might be more difficult in the future if the stock price falls as a result of all the negative press that The Company has been facing lately. And if not for the bullishness in the markets and for cannabis stocks in general, MedMen’s share price could be a lot lower than where it is today.