MedMen Enterprises Inc., a U.S.-based cannabis business, announced that it made an assignment into bankruptcy pursuant to Canada’s Bankruptcy and Insolvency Act on April 24, 2024. The company cited its current financial conditions, including its inability to pay its liabilities as they came due on a going-forward basis, and the anticipated enforcement actions of secured creditors. Although it will be no surprise to many that MedMen is seeking insolvency protection, the industry is watching with interest as parallel proceedings move forward in Canada and in the State of California. The company also issued a press release after markets closed on Friday, April 26th.
The troubled company has disclosed that it has C$561 million ($410.4 million) in liabilities. The filing comes approximately five years after MedMen’s market valuation peaked at around $3 billion during the height of the so-called “Green Rush” in the cannabis industry. On the same day MedMen filed for bankruptcy in Canada, MedMen’s wholly-owned subsidiary, MM Can USA, Inc., a California corporation, was placed into receivership in the Los Angeles Superior Court, Santa Monica Division to effectuate an orderly dissolution and liquidation of its California-based assets.
Industry insiders anticipate the company will seek ancillary receivership proceedings in other U.S. states where the U.S.-based wholly owned subsidiary controls or owns assets. As a result of such receivership proceedings, the operations and assets of MedMen’s subsidiaries will be dissolved or liquidated pursuant to applicable state laws in the United States. Bankruptcy protections, of course, are not currently available to cannabis related businesses in the United States.
While MedMen invested heavily to position itself for success in legal cannabis sales, it has faced steep competition from other state-licensed cannabis sellers in the states in which it operates, and competitive disadvantages from the unregulated markets in New York and California, among other headwinds. It will be interesting to see what lessons will be learned from MedMen’s business struggles pre-filing, and from the parallel insolvency proceedings.
For questions on this recent development, contact Max Riffin or any other member of Prince Lobel’s Cannabis Group.