Is the Cash Grab by Medmen Enterprises Inc (OTCMKTS:MMNFF) a Golden Opportunity?

Is the Cash Grab by Medmen Enterprises Inc (OTCMKTS:MMNFF) a Golden Opportunity?


A key decision for active traders in the cannabis patch will be how to view the recent capital raise by Medmen Enterprises Inc (OTCMKTS:MMNFF). Specifically, the company just announced that it has entered into a letter of engagement with Canaccord Genuity Corp., under which Canaccord has agreed to purchase, as lead underwriter and sole bookrunner, on behalf of a syndicate of underwriters 17,648,000 units of the Company, on a “bought deal” basis pursuant to the filing of a short form prospectus, subject to all required regulatory approvals, at a price per Unit of $6.80 for gross proceeds of $120,006,400.

According to the release, “The Company has agreed to grant the Underwriters an over-allotment option to purchase up to an additional 2,647,200 of the Units at the Issue Price, exercisable in whole or in part, at any time on or prior to the date that is 30 days following the closing of the Offering. The over-allotment option may be exercised to acquire Units, Class B Shares, and/or Warrants (as defined below) of the Company. If this option is exercised in full, an additional $18,000,960 will be raised pursuant to the Offering and the aggregate gross proceeds of the Offering will be approximately $138,007,360.”

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, MMNFF just announced a bought deal capital raise providing as much as an extra $120M in cash. It is dilutive, but the question is all about what the market will assign in terms of assumptions around ROI on new capital.

We think the dip seen on Friday could be an opportunity given the company’s tremendous recent moves to capture future potential market share in the evolving US cannabis marketplace.

Recent action has seen a bit less than -10% stripped out of shares of the company during the trailing month. What’s more, the name has benefitted from a jump in recent trading volume to the tune of exceeding 160% over what the stock has registered over the longer term.

Earning a current market cap value of $353.55M, 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. As more color becomes clear on the name, we will review the situation and update our take. 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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