3 Cannabis Firms On A Collision Course With Bankruptcy

Earlier this year, MedMen came under fire after reports highlighted its inability to pay vendors and this development added fuel to the fire. The company tried to issue common stock to vendors in lieu of cash, but this strategy did not pay off. In an attempt to remedy the situation, the US cannabis retailer hired FTI Consulting to manage its outstanding balances to vendors and partners. MedMen has taken drastic measures to reduce costs, including the firing of hundreds of workers, the selling of stores and licenses, and the reworking of financing arrangements.

Although we are cautious with MedMen as a standalone operator, we do not expect to see the company go out of business. MedMen owns attractive assets and we expect to see another US cannabis retailer come in and acquire the business in the near future. The last twelve months have been brutal for the company and this is an opportunity that we will continue to cautiously monitor. We believe that MedMen is on a path to bankruptcy and only time will tell if the company is able to stay afloat.

Aurora Cannabis is Facing Substantial Headwinds

Earlier in the article, we briefly discussed the recent development that was announced by Canopy Growth as it relates to the closing of two of its production facilities in Canada. When it comes to the Canadian cannabis market, it is difficult to mention Canopy Growth without acknowledging the issues that Aurora Cannabis (ACB.TO) (ACB) is facing.

Like Canopy Growth, Aurora Cannabis invested hundreds of millions of dollars in the construction of massive cultivation facilities in Canada. Another similarity between the operators is related to the types of companies that were acquired by each business. With that being said, Aurora Cannabis completed these acquisitions when valuations were near all-time highs, Canopy Growth was somewhat ahead of the curve, though and completed acquisitions in 2015 and 2016 (valuations were not nearly as high at this time).

One of the most significant differences between Canopy Growth and Aurora Cannabis is related to the strength of their respective balance sheet. Unlike Canopy Growth, Aurora Cannabis did not receive a multi-billion-dollar investment and this has made things more challenging for the business. During the last year, Aurora Cannabis has sold off several previous investments, shut down facilities, and changed up the management team.

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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 8 months ago Member's comment

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