The situation has not been particularly great for cannabis stocks over the past year or so, but recently some of those stocks have managed to turn things around a bit. It could be an excellent example of such a turnaround considering the fact that it emerged as one of the hottest cannabis stocks last month.
However, investors need to take a closer look at the company before investing. MedMen Enterprises (CSE:MMEN) (OTCQX:MMNFF) had been troubled with a cash crunch for quite some time, but the management has successfully redeemed the situation.
In the fiscal third quarter, the company managed to sell stock worth $7.8 million, got proceeds of $12.5 million from a senior secured convertible debt facility worth $250 million, and picked up $77.8 million by way of a secured long term loan. While that may paint a rosy picture, investors need to look closely at MedMen’s balance sheet. The company currently has assets worth $123.9 million and liabilities worth $184.5 million. It doesn’t seem the company has the required capital to take care of the expenses over the course of the next 12 months. Despite raising new working capital, the company’s immediate future remains unclear.
On the other hand, it is also important to consider the fact that in addition to the cash problems, MedMen has also performed poorly in California, its core market. In Q3 2020, sales from the company’s operations in California stood at one-third of the total. However, in terms of growth, the rise in sales in the state was only a meager 5% year on year.
California is the biggest pot market in the industry, and despite having a strong presence there, MedMen is struggling to build its business there. Lastly, the company has continued to make enormous losses despite the cost-cutting measures from the management. Hence, experts believe that it could be wise to avoid the MedMen stock at this point.