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Monday, January 17, 2022

Medmen Enterprises Inc (OTCMKTS:MMNFF) Starts to Pay Off the Buzz

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As long-time readers of this blog will know, we have been big fans of Medmen Enterprises Inc (OTCMKTS:MMNFF) shares for quite some time. And recently, we put out a piece noting that we thought the stock would likely be “in the spotlight” very soon, and our reasons for that idea. Now, with shares up over 40% in just the past couple of days, we won’t waste time with a bow but will move to what appears to be the proximal catalyst fueling this latest breakout: the LOI for the acquisition of PharmaCann.

Specifically, the company announced late last week that both it and PharmaCann LLC have signed a binding letter of intent for MedMen to acquire PharmaCann in an all-stock transaction valued at $682 million. Now, just today, we got further details on the deal, which we will cover below. But first, let’s take a big-picture view of the stock.

Medmen Enterprises Inc (OTCMKTS:MMNFF) frames itself as a company that, together with its subsidiaries, operates in the cannabis space in the United States.

The company cultivates, produces, possesses, uses, and distributes/retails cannabis in the recreational and medicinal cannabis marketplace. As of June 6, 2018, it owned and operated 18 licensed cannabis facilities under the MedMen brand name in California, Nevada, and New York.

The company frames itself as “the preeminent cannabis company in the United States” with multiple assets and operations in California, Nevada, New York, and Florida. MedMen owns and operates licensed cannabis facilities in cultivation, manufacturing, and retail, and is one of the most well-recognized cannabis brands in the world today.

Headquartered in Los Angeles, MedMen employs more than 800 workers across the United States. It was founded in 2010 by Adam Bierman and Andrew Modlin, two visionary entrepreneurs who saw not just a tremendous business opportunity in the growing legalization of marijuana, but a chance to re-define our society’s relationship with cannabis. MedMen supports sensible, clear and just drug laws.

The Company is the single largest financial supporter of progressive marijuana laws at the local, state and federal levels, giving directly to pro-legalization groups, industry organizations and political candidates.

The company is headquartered in Culver City, California. MedMen Enterprises Inc. is a subsidiary of The Medmen Of Nevada 2 Llc.

According to company materials, “MedMen Enterprises is a leading cannabis company in the U.S. with assets and operations across the country. Based in Los Angeles, MedMen brings expertise and capital to the cannabis industry and is one of the nation’s largest financial supporters of progressive marijuana laws.”

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As noted above, our MMNFF bullishness has been paying off over the past two trading sessions, with the stock launching higher on a binding agreement for the acquisition of PharmaCann. In all, traders will note 40% added to share values of the stock over the past week of action.

According to the release, “Under the terms of the Agreement, PharmaCann units will be exchanged for equity interests which will include the right to receive the Company’s Class B Subordinate Voting Shares (“Shares”), and which on a pro-forma basis will equal 25% of the then fully-diluted outstanding shares of the Company (calculated based on the treasury stock method) upon the closing of the transaction (the “Closing”). The total transaction was valued at $682 million (USD) based on the closing price of the Company’s Class B Subordinate Voting Shares on October 9, 2018 (such value being subject to change based on the daily closing price of the Company). No change of control to the Company will result upon the Closing. The Shares are expected to be subject to lock up agreements for a period of between 6-12 months.”

Importantly, there is nothing in the additional information that sours anything that was sweet about the announcement from last week.

Now commanding a market cap of $443.19M, MMNFF has about $12.2M in cash on the books, which must be weighed relative to a mountain of over $86M in total current liabilities. The company has been pulling in significant revenues, with over $7M in Q1 of this year, representing over 630% quarterly y/y growth on the top line. We will update the story again soon as further details emerge. Sign-up for continuing coverage on shares of $MMNFF stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!

Disclosure: we hold no position in $MMNFF, either long or short, and we have not been compensated for this article.

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