MEDMEN trying to stage a reversal, opportunity my await.

With its stock down to a humbling $1.90 a share from a peak of $6.50, MedMen Enterprises reassured investors today that at least its cannabis sales are on track. The California-based pot chain said a preliminary tally of June-quarter revenue showed a 15% increase from the March period, to $42 million. MedMen says it is also making progress on trimming the high spending that drove it to huge losses and some desperate fundraising deals.
In over-the-counter trading Tuesday morning , MedMen stock (ticker: MMNFF ) rose 6% on the news, to $1.91. Final results on the June period won’t be ready until the end of October, said the company.
The flashy trendsetter of American pot sellers, MedMen’s slick stores and management perks were badges of out-of-control corporate overhead expenses, which in the December 2018 quarter reached a $164 million annualized rate—on annualized sales of just $120 million. Free cash flow for that quarter was an annualized negative $450 million. The company’s hyping of its business and its stock led to a number of lawsuits.
In today’s announcement, CEO Adam Bierman said that in its June 2019 quarter, MedMen showed “solid execution.” By the end of the September quarter, the company expects to have reduced its overhead expenses to a $115 million annual rate. That may bring the company close to operating profitability, if the quarter’s revenue reaches the $64 million forecast by analysts polled at FactSet.
By the end of 2019, MedMen hopes to boost its revenue by closing a merger with rival PharmaCann that has been undergoing antitrust review by the U.S. Justice Department since the companies announced their deal back in December 2018. Merger reviews have gone slowly for American pot operators—as federal regulators try to get comfortable with an industry that sells cannabis where it is legal under state law, but is flouting the drug’s federal prohibition. The companies say that this week they finished supplying the DOJ with the information it requested.
If its pending mergers had been complete, MedMen says it would have had June quarter sales of $61 million at 37 retail stores. It has licenses for 92 locations, across the U.S.
Benfits of a turnaround by MedMen will accrue first to the hedge funds that lent $250 million to the cash-consuming pot chain. The notes are convertible to stock, at prices below $2.55 a share. MedMen has also arranged to sell $30 million worth of stock at $2.50 to Gotham Green Partners and to Wicklow Capital, a fund backed by the Chicago pioneer of high-frequency securities trading, Dan Tierney.
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