Adam Bierman, the co-founder of the once achieving-great-heights cannabis retailers MedMen Enterprises has surrendered his voting control and resigned as chief executive.
The resignation, effective from Feb.1, has come following the trembling financial health of the Los-Angeles based company that has laid off hundreds of employees over the past few months and sold their noncore assets.
In such times of worrisome turn of events for the enterprise and as a sign of a possible cash burn/crunch, the company has asked its vendors to take equity payments. On Friday, in a news release, the co-founder of MedMen, Andrew Modlin also agreed to give up his super-voting shares by December 2020.
According to Mike Regan, an equity analyst for Marijuana Business Daily’s Investor Intelligence, the biggest takeaway is that these shareholders surrendered their super-voting shares. Such shares offer larger than proportionate voting rights and letting go of them is a significant move. Regan noted that the sup[er-voting shares enabled Modlin and Bierman to control the company.
Lawsuits allege that the two co-founders of the MedMen enterprise did so for their personal benefit, rather than the company’s. However, both Modlin and Bierman have denied any such allegations.
Regan added that the shareholders will now have a stronger say, and theoretically, have the ability to change control of the company. MedMen’s board of directors appointed Ryan Lissack as the interim CEO. He is the chief technology officer and the chief executing officer now.
The immediate reaction from the cannabis sector indicates that many were predicting such a move from MedMen.Tom McGlade, CFO of Legion of Bloom, a California based brand, wrote in an email that Adam’s resignation as a CEO of MedMen is not at all a surprise to anyone in the marijuana industry, in fact, many people wonder why it took so long.
Morgan Paxhia, a principal at Poseidon Asset Management, said he wasn’t surprised at all by the news. Paxhia pointed out that if this had been set up in a more conventional public company type structure, he would’ve expected change a lot sooner considering Modlin’s and Bierman’s longstanding control of supervoting shares, which made it difficult for the board of directors to implement a major change or any modifications in the company’s direction.
He also added that Adam himself admitted they should have made changes earlier and these problems have been withstanding for months and months. It isn’t anything new. So Adam basically admitted a quite major management misjudgment that jeopardized the entire company and put it at such a vulnerable position, said Paxhia.
Santa-Cruz based cannabis retailer and manufacturer Bryce Berryessa said he was on the edge of deciding whether or not to provide MedMen with inventory, but after hearing that manufacturers hadn’t been paid by the company for up to six months, Berryessa decided not to go with MedMen.
Despite the crumbling financial issues of MedMen, it still appears as if he is coming out on the top and making money while the vendors are left unpaid, said Berryessa.
Avis Bulbulyan, a Los-Angeles based consultant and CEO of Siva Enterprises, added that MedMen’s change in leadership is one of the best things that could’ve happened for the cannabis industry. One company was almost single-handedly bringing down the entire industry, as far as the traction and momentum are concerned, said Bulbulyan.
For MedMen, it is the only thing that could have happened to give any chance of a turnaround, further explained Bulbulyan. He further said that due to MedMen’s high profile, even steps taken outside the cannabis industry by Bierman and the company were associated with the cannabis industry as a whole. Bierman’s departure from the position of CEO and the company will give others the chance to repair the damage done to the industry and their own enterprise.
Is MedMen Worth Saving?
Industry leaders raised questions about MedMen’s road to recovery and said it would take a lot of time for the company’s leadership to correct its course. Paxhia said the enterprise will have to move aggressively and rapidly to save their organization.
Paxhia added that the company hasn’t been saved yet, so he doesn’t know if it’s too far down the field. He also predicted that the bump in the stocks of MedMen on Friday morning – post the resignation and surrender of Beirman is most probably temporary.
MedMen’s financial situation has caused severe damage to a lot of brands in the cannabis industry. The cash in the Californian system is quite low and it’s happening across several companies. And MedMen seems to be just the kind that is compounding the capital crunch.
On the other hand, Bulbulyan said that MedMen’s assets and brand equity are worth saving, and it really depends on how the incoming leadership will decide to pivot. They have taken enough roadblocks on the way to understand what direction to go with.
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