What cannabis investors should know about MedMen’s Canadian trading debut

U.S. marijuana companies increasingly are turning to cannabis-friendly Canada to go public, with Los Angeles-based MedMen the latest business from south of the border to take the plunge.

The multistate marijuana company debuted Tuesday on the Canadian Securities Exchange under the ticker symbol MMEN. Its stock closed at $4.95 Canadian dollars ($3.85), down 12 cents from the day’s opening price.

MedMen’s listing mimics other U.S. marijuana companies turning to Canada’s public markets to tap easier-to-access pools of capital, including multistate operators iAnthus Capital and Green Thumb Industries.

“The Canadian capital markets have been very embracing of U.S. cannabis entities, ” said Scott Greiper, president of New York-based Viridian Capital Advisors.

“It’s quickly become the preferred capital market for the industry and will continue to be so as long as cannabis has its federally illegal status in the U.S.”

Here’s a quick look at what investors should know about MedMen’s public debut:

1. $1.65 billion valuation, big paychecks

Through a private placement tied to its plan to go public, the firm raised $110 million – giving MedMen an implied valuation of $1.65 billion, the company said.

That’s a hefty spike from February, when the firm raised $30 million from a Toronto-based investor for a 3% stake in the company at a valuation of $1 billion – although questions were raised  about that figure.

MedMen has yet to turn a profit. Through June 30, 2017, the firm posted sales of $8.4 million and an operating loss of $43.2 million.

Meanwhile, under the company’s new public structure, the top executives will receive a lucrative compensation plan.

CEO Adam Bierman and President Andrew Modlin will each receive a $1.5 million annual salary under a four-year contract.

They will also receive $10 million in redeemable MedMen units, based on share price, and $30 million in units carved out for a long-term incentive plan that will vest over two years.

If MedMen’s valuation at any time exceeds $2 billion, Bierman and Modlin will each receive a $4 million cash bonus.

2. Reverse takeover gaining fans in cannabis sector

MedMen is the latest cannabis firm to pursue a reverse takeover (RTO) in its course to go public. RTOs allow companies to go public without launching an initial public offering of its shares – the traditional route for most firms.

In MedMen’s case, the firm brokered a deal to take over Vancouver, British Columbia-based Ladera Ventures – a shell company listed on the TSX Venture Exchange.

Reverse takeovers are considered to be cheaper and faster than pursuing a full-on IPO, although snags can arise.

In MedMen’s case, the firm initially pursued an RTO with  Toronto-based OutdoorPartner Media in early April.

3. ‘Apple Store’ of cannabis

MedMen employs 800 workers at 18 licensed facilities in California, Nevada and New York.

The company “seeks to replicate the Apple Store model” in its bid to win over customers with sleek, customer-centered retail shops, the firm disclosed in an April regulatory filing.

“We are making marijuana mainstream by making it okay for soccer moms and middle-aged professionals to use cannabis products,” Modlin said in a news release.

“We are marching steadily toward a future where buying and using cannabis products will be just as normal as buying wine or beer.”

Earlier this year, the company also launched a joint venture with Cronos Group, a Canadian medical cannabis producer, manufacturer and distributor in Toronto.

Lisa Bernard-Kuhn can be reached at [email protected]

3 comments on “What cannabis investors should know about MedMen’s Canadian trading debut
  1. Brett Roper on

    Interesting read although the statement of “That’s a hefty spike from February, when the firm raised $30 million from a Toronto-based investor for a 3% stake in the company at a valuation of $1 billion – although questions were raised  about that figure” may not be completely accurate as that non-binding funding commitment had several performance elements included that likely ended up making it a part of the $110M raised if in fact all of the provisions were met. I would be curious to know if and when the $30M actually came to Med Men.

    Hope they do well but clearly they have their work cut out for them, pretty much like most of us in the space.

    Good fortune to Adam and his team!

    Reply
    • Ted Steven on

      Considering Andrew Modlin is the Cannabis Industry Advisor listed on the capital group’s website, and considering he “will receive a lucrative compensation plan” outlined above, consider these considerations.

      Reply
      • Ted Steven on

        Further, my favorite by someone who was with this group is a nice little piece called “The Case for Merit-based Oligopoly in Marijuana.”

        What a nice coincidence that those arguing the merits of “merit-based” oligopoly are the prospective oligarchs!

        Reply

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