MedMen was America's largest and most valuable legal cannabis retailer. But until the latest update, the golden pot company has burnt down and lost 95% of its value. News is running hot, lawsuits are waiting, so what has gone wrong here with the Apple of the pot industry? And for cannabis start-ups, what mistake to avoid falling into the same tragic ending?
MedMen was the first-ever mainstream, national cannabis consumer brand in the States. Co-founder Adam Bierman was said to be the 'Steve Jobs of Weed'. Which according to many, is due to his aggressive entrepreneurial style and vision for MedMen in years to come.
Bierman aimed at recontextualizing cannabis use and separating his company from the 'stoner' stereotype. He wanted to reach out and hit hard into others' niches, and truly crave out his empire of cannabis.
Within their first years of forming MedMen, Bierman and Modlin's investors literally had no experience or information of the marijuana industry. From how cannabis was grown, packaged, taxed, or sold, or vital legal status, it was quite blurry at that point.
As a result, the two could make grandiose claims about the market, promising returns far greater than actual projections. Once investors were on board, the company began establishing Apple-Esque stores in California, Florida, and then Illinois. They routinely offered to local governors to help get cannabis laws over the line. MedMen continuously gained investors and capital in the following months, which put them in the leading position of the cannabis market.
Later in 2018, MedMen got published on the Canadian stock exchange with an implied worth of $1.6 billion. Then in October of the same year, an announcement was released announcing the acquisition of PharmaCann, as well as stock and retail stores, to the tune of virtually $700 million. This one event made MedMen the largest cannabis acquisition to date.
Without any other consideration, MedMen is the real leader of the US cannabis industry at that moment, and for many years to come.
During the peaks of their success, MedMen's focused on the aesthetic pleasing and sleekness of all their stores' designs. The company then began to pop up with more and more storefronts all over the country.
Though, there have been legal problems in some states relating to promoting as actively advertising marijuana was deemed misappropriated.
Each storefront boasted vivid red and prime locations – MedMen out there for the world and never hidden. The cannabis giant was always going to be obvious – to increase the prevalence of its brand and the normalcy of the cannabis retail market.
MedMen had nearly over 1,000 cannabis products in stock; from regular flower to vape pens, cannabis tea, and even edibles. Their in-house marketing agency created MedMen's magazine Ember incorporating high-end design with headlines such as 'Your Sex Life Could Use Some Weed', and visual in-store campaigns continued to normalize marijuana with impressive visuals and models.
In early 2018, a Canadian investor sunk $30 million into MedMen for a 3% stake, claiming they had a ten-figure future. This had made Bierman and Modlin go wild with their spendings. Each of them began to purchase mansions – with $3.9 million for Modlin, and Bierman for $4.7 million.
Once the unicorn start-up of the cannabis industry, MedMen's downfall was somewhat unexpected to the public eye. In the later months of 2018, the company lost up to $130 million.
By November 2018, a lawsuit was raised by the previous staff, claiming the corporation had desecrated labor laws. In Jan 2019, 2 early investors sued Bierman and Modlin, claiming the founders had improperly prevented them from cashing their shares and jumping ship.
Then in January, MedMen's former chief financial officer James Parker lodged a sensational complaint. Parker accused the two founders of manipulating the stock, committing bank fraud, hiring companies to gain information on their perceived competitors, and creating illegal donations to a Nevada politician. He also claimed he was kicked out of the company against his contract. MedMen took action by suing Parker on the claim of breach of contract and the issue is still in court.
Despite the fall of their stock price and various legal issues in the works, MedMen continued to grow the company – hiring over 1,300 employees right around the summer of 2019. This is also the time Modlin purchased his second mansion within the Hollywood Hills. This then swing him within the same neighborhood as Keanu Reeves and DiCaprio.
But then in August 2019, the FBI made public statements regarding the likelihood of corruption within cannabis markets and state governments. In September, a young mayor in Massachusetts was charged with accepting bribes to approve marijuana shops. In Jan 2020, Bierman himself stepped down from chief operating officer and ceded his pick rights inside the corporate, remaining on the board. MedMen's stock price sank even deeper with the resignation.
The next month saw 128 more employees resign, and Modlin sold his house in West Hollywood while keeping his other mansion. However, that wasn't enough to stop the cash discharge. As a result, the following months saw even more layoffs, and in April, a creditor sued Bierman and Modlin. This list of problems and lawsuits goés on and on.
Although Florida cannabis sales hit an all-time high in April amid the coronavirus pandemic, MedMen closed five out of eight of this state's stores in May, claiming closure is only temporary.
But soon, as expected, MedMen stock was down a whopping 95% from its mid-2018 high. If they had been in a better position, Bierman and Modlin probably could have prospered in the booming coronavirus market, but they were too far gone.
MedMen was a company first established as a tech start-up from the beginning. They were once the star in the cannabis industry but couldn't keep up with the stability or the cash to support the lavish lifestyle Bierman and Modlin had chosen. MedMen still exists as an entity, but market experts believe it will be a case of selling whatever assets are left to whatever investors they can find.
We deeply understand the pressure that every start-up has when they first start their business. Everyone wants that golden success, but only the real, solid game-changing player could handle everything that comes along. Branding, understanding legal prospects, and having a stable mind is more than just necessary for cannabis entrepreneurs. To simultaneously avoid all the tragic mistakes that lead to the fall of Medmen, you should learn to stay away from fraud, scams, and the temptation of spending. Be wise, and learn from others' mistakes are your way to go.
If you need any further support and advice from a solid cannabis marketing agency, Studio Linear is always ready. Contact us for more information.