3 Cannabis Firms On A Collision Course With Bankruptcy

After a tough 2019, a majority of analysts that are focused on the cannabis industry expected to see the sector recover in 2020. So far this year, this expectation has not come to fruition and the sector continues to be under significant pressure.

A lot can change in the span of one year and the cannabis industry is the perfect example of this. Prior to the sector’s decline, cannabis companies had no issue with raising capital, with completing acquisitions, and with expanding. Fast forward to today and industry leaders like Canopy Growth Corporation (WEED.TO) (CGC) are closing facilities, canceling future facility buildouts, and eliminating jobs to align supply and demand and to improve production efficiencies.

When thinking about the companies that recently reported substantial fundamental changes to the business, Canopy Growth is one of the first companies to come to mind. With that being said, Canopy Growth has approx. $2 billion of cash on hand and is well-positioned to survive this tough period.

The vast majority of cannabis companies have not been as lucky as Canopy Growth and several high-profile operators are facing serious issues from a capital standpoint. Today, we have highlighted three well-known cannabis businesses that we believe to be capital constrained and that could go bankrupt.

MedMen Enterprises: A Fall Far From Grace

MedMen Enterprises (MMEN.CN) (MMNFF) is one of the best-known cannabis retailers in the US with significant leverage to some of the most attractive state markets. Although the US cannabis retailer has been reporting increasing revenues, expense have been rising much faster than anticipated and this has created a major problem for the business.

Last year, in an effort to shore up its balance sheet, MedMen accepted a massive loan from Gotham Green Partners and is now having trouble accessing the remaining capital on the loan. If the company cannot find a way to strengthen its balance sheet, we expect to see a leading US operator acquire non-core assets that are owned by MedMen for pennies on the dollar.

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Disclosure: This report was authored by and is property of Technical420. All information and data relied upon in drafting this report is publicly available. The author believes and considers its ...

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Cannabis Stock Buyer 7 months ago Member's comment

Lost of these cannabis companies are in trouble. I suspect many won't survive the pandemic.