(This story has been updated to include reaction from industry insiders.)
Adam Bierman, the flamboyant co-founder of once-high-flying cannabis retailer MedMen Enterprises, resigned as chief executive and surrendered his voting control.
The resignation, effective Feb. 1, comes at a time that the Los Angeles-based company has laid off hundreds of employees, sold noncore assets and has been beset by questions about its financial health.
In the most recent worrisome turn of events for shareholders and a sign of a possible cash crunch, MedMen asked vendors to consider taking equity payments.
In a news release Friday, MedMen said co-founder Andrew Modlin also has agreed to give up his super voting shares by December 2020.
Such super voting shares provide holders with larger than proportionate voting rights.
In this case, Regan noted, the shares enabled Bierman and Modlin to control the company.
Shareholders now will have a stronger say and, theoretically, the ability to change control of the company, Regan said.
The company’s board of directors appointed Ryan Lissack as interim CEO. He is the company’s chief operating officer and chief technology officer.
Immediate reaction from the marijuana sector indicates many were expecting MedMen to make such a move.
“Adam’s demise as CEO of MedMen is not a surprise to anyone in the industry. Most just wonder why it took so long,” Tom McGlade, CFO of California-based Legion of Bloom, wrote in an email to Marijuana Business Daily.
Morgan Paxhia, a principal at San Francisco-based Poseidon Asset Management, said he was “not surprised at all” by the news.
“If this had been set up properly, as a more traditional public company type structure … I would have expected change a lot sooner,” Paxhia said, pointing to Bierman’s and Modlin’s longstanding control of supervoting shares, which he said made it hard for the board of directors to implement a major change in the company’s direction.
“These problems have been going on for months and months, it’s been known, and Adam himself even admitted they should have been making changes sooner,” Paxhia said. “So he basically admitted a pretty significant management misjudgment that put this company in very serious jeopardy.”
Santa Cruz-based cannabis manufacturer and retailer Bryce Berryessa said he was on the fence last year about providing MedMen with inventory but decided not to once he heard that other manufacturers hadn’t been paid by MedMen for up to six months.
“Despite that, even given the restructuring, it still appears he’s coming out on top and making money while vendors are still left hurting,” Berryessa said.
Los Angeles-based consultant Avis Bulbulyan, CEO of Siva Enterprises, added that the leadership change at MedMen is “one of the best things that could have happened for the industry.”
“One company almost single-handedly has been bringing down the entire industry, as far as the momentum and traction. The writing was on the wall,” Bulbulyan said. “For MedMen, it’s the only thing that could have happened to have any chance of a turnaround.”
Bulbulyan said that due to MedMen’s high profile – even among those outside the cannabis space – any missteps made by Bierman and the company were often linked to the cannabis industry as a whole. Which, he said, means Bierman’s departure makes it more likely that others can repair damage done to the industry’s financial image.
“The industry is not MedMen, and MedMen is not the industry,” Bulbulyan said.
Industry executives raised questions over MedMen’s future and said it would take a lot of work for new company leadership to correct its course.
Paxhia said MedMen will “have to move fast and aggressively” to save the company.
“That hasn’t happened yet, so I don’t know if it’s too far down the field (to save),” Paxhia added.
The stock bump MedMen got Friday morning – up about 10% following news of Bierman’s departure – is likely temporary, Paxhia predicted.
And, he said, MedMen’s financial situation led to “damage caused to a lot of brands. The cash in the system in California is low; we’re seeing it across many companies. And (MedMen is) just kind of compounding the capital crunch.”
Bulbulyan, however, said MedMen’s brand equity and widespread assets are “worth saving” and that it’ll really depend on how incoming leadership decides to pivot.
“They’ve taken enough lumps along the way that they’re going to have a better idea of what direction to go in,” Bulbulyan said.
Jeff Smith can be reached at [email protected]
John Schroyer can be reached at [email protected]