Once touted as the 'Apple of Weed', MedMen have suffered a spectacular fall of grace underpinned by their lavish spending, excess security and cannabis' flimsy legal status. This is the rise and fall of MedMen, and why it represents the issues with the US legal cannabis industry.
MedMen was one of, if not the first, mainstream, nationwide cannabis consumer brand in the US. Co-founder Adam Bierman was hailed the 'Steve Jobs of Weed' for his aggressive entrepreneurial style and vision for the brand and the company.
Bierman has always been a risk-taker – at 17, he hired a roller rink and threw a party, charging his fellow high schoolers admission. The entertainment? The then relatively unknown Black Eyed Peas. However, it didn't exactly go to plan.
"I didn't do very well on the deal and the Black Eyed Peas ended up not being paid and left pretty upset," Bierman recalled years later. "But hey, you know?"
Bierman's co-founder Andrew Modlin is far more reserved and more learned in the ways of marijuana and described himself as a longtime connoisseur. "I am a traditionalist," he told one interviewer. "I prefer to smoke flower the old-fashioned way."
In 2009, Modlin and Bierman were working together in their branding and marketing firm. They went to help a woman rebrand her marijuana company which was raking in $300,000 a month. It was then, that the duo realized they were in the wrong business.
Bierman aimed at recontextualizing cannabis use and separating his company from the 'stoner' archetype. He wanted to hit the 'Chardonnay Mom' market – and hit it hard.
Within their first years of forming MedMen, Bierman and Modlin's investors had little or no understanding of the pot industry – how cannabis was grown, packaged, taxed, or sold. As a result, the two could make grandiose claims about the market, suggesting that it was more lucrative than it was, while promising returns far outside of actual projections. Once investors were on board, the company began opening Apple-esque stores in California, Florida and Illinois. They routinely contributed to local governors to help get cannabis laws over the line. They continued gaining investors and gaining capital – putting them to the front of the US market.
In mid-2018, MedMen first went public on the Canadian stock exchange with an implied valuation of $1.6 billion. In October 2018, a statement was released boasting the acquisition of PharmaCann, including stock and retail stores, to the tune of almost $700 million, making it the largest cannabis acquisition to date.
MedMed was poised to be the leader of the US cannabis industry for years to come.
In order to hit the 'Chardonnay Mom' market, MedMen's stores were created with a clean and sleek aesthetic. iPads behind glass cases were used to peruse and select strains that were then prepared behind glass by employees clad in bright red shirts, proudly bearing the MedMen name.
Though, there were legal issues in some states regarding marketing as actively advertising marijuana was deemed illegal. This meant that the stores were under scrutiny for their behind-glass packaging of purchases and the display of merchandise. In some cities, the majority of the shop was deemed too risque, resulting in opaque windows which were later reversed.
Each storefront boasted vivid red and prime locations – MedMen was never going to be hidden away in a back alley. The bourgeoning cannabis giant was always going to be obvious – to increasing the prevalence of its brand and the normalcy of the cannabis retail market.
MedMen eventually sold over 1,000 cannabis products in their stores from regular flower to vape pens, cannabis tea to edibles. Their in-house marketing agency created MedMen's own 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 weed with images of a diverse range of models.
The Office and Company Spend
The MedMen office is where the hubris of Bierman and Modlin was displayed and flaunted.
The interior was designed akin to many Silicon Valley tech startups – an excess of glass and sleek red metal accents. The company employed a 'culture group' whose sole purpose was to maintain the culture and morale. Free snacks were constantly on offer along with a kombucha machine – one of the more bizarre elements. There was a regular masseur in for days at a time, even though one ex-employee recounts seeing only one appointment in their schedule.
Bierman also employed a 'performance improvement expert' with a reported salary of $300,000. This 'expert' has been reported as being Bierman's personal marriage counselor, who was wrongfully being paid with company funds. The company also lashed out to have an in-house point of sale software created – MyMedMen.
One of the larger questionable expenses within the company was the personal security of Bierman and Modlin. In 2012, a dispensary owner was kidnapped, castrated and left for dead in a Californian desert. He survived, but the incident shook Modlin and Bierman to the core. They started spending big on security – up to $4 million annually at its peak, including the installation of a panic room in Bierman's home. The pair were also rumored to have asked around to see what security measures Steve Jobs and Elon Musk had in place.
As those reading, this will likely know, the cannabis industry is a major one, with huge room for growth as legalization continues to be a topic of discussion in state and federal departments. At the moment, however, it remains a largely nascent market – with legal uncertainties, no less.
It was in November of 2016 that eight out of nine state legalization ballots passed – signalling the start of something big. In July of that year, MedMen had stated they would be raising $100 million. They fell short at $60 million, but it made potential future investors take note.
In early 2018, a Canadian investor sunk $30 million into MedMen for a 3% stake, claiming they had a ten-figure future. This kicked Bierman and Modlin into a spending frenzy. They each purchased mansions – Modlin for $3.9 million, and Bierman for $4.7 million.
In May 2018, MedMen went public. Due to the federal illegal status of cannabis, they chose to begin trading on the second-tier Canadian Securities Exchange.
As shiny as their rise was, so too was their downfall. In the second half of 2018, the company lost around $130 million.
By November the same year, a lawsuit was raised by previous employees, claiming the company had violated labor laws. In January 2019, two early investors sued Bierman and Modlin, claiming the founders had improperly prevented them from cashing their shares and jumping ship.
Later in January, MedMen's former chief financial officer James Parker lodged a sensational complaint. Parker accused the founders of manipulating the stock price, bank fraud, hiring private intelligence companies to gain information on their perceived 'enemies', and making illegal straw man donations to a Nevada politician. He also claimed he was forced out of the company against his contract. MedMen is counter-suing Parker on the claim of breach of contract and the issue is still in court.
Although the stock price continued to decline and they had various legal issues in the works, MedMen continued to grow the company – hiring over 1,300 employees by their peak in mid-2019. It was around this time that Modlin purchased his second mansion in the Hollywood Hills putting him in the same neighborhood as Keanu Reeves and Leonardo DiCaprio.
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 outlets.
These FBI claims seemed to hit a little too close for home for the MedMen founders. In October 2019, they called off the PharmaCann deal. In November, they made a number of layoffs, didn't continue their retail expansion and moved their stake into a cannabis-focused real estate investment trust. By December, MedMen announced that the company would be selling up its assets in Arizona and Illinois, and reduced its workforce by more than 40% in the month.
In January 2020, Bierman himself stepped down from CEO and ceded his voting rights within the company, remaining on the board. MedMen's stock price dropped further with the resignation.
The next month saw 128 more employees laid off, and Modlin sold his house in West Hollywood, retaining his Hollywood Hills mansion, though that wasn't enough to stop the cash hemorrhaging. As a result, March saw even more layoffs, and in April, a creditor sued Bierman and Modlin. This matter is ongoing.
Although Florida cannabis sales hit an all-time high in April amid the coronavirus pandemic, MedMen closed five out of eight of their Florida stores in May, claiming that the closures would be temporary.
By mid-May this year, 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 that was run as a tech startup from the get-go, in an industry that doesn't have the stability or the cash to support the lavish lifestyle Bierman and Modlin chose to lead. 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.
This slow trainwreck of a company with so much potential is looking poised to be one of many collapses to come in the US cannabis market. MedMen represents the entire industry – it was positioned to overcome the challenges of being a startup in the flimsy weed industry but has gloriously failed.
Issues with the US Legal Cannabis Market
The legality of cannabis in the US has a number of implications for startup businesses. The entire industry is on tenterhooks – varying laws, inability to access financial institutions, corruption and concerns of foreign money flooding the market don't make for a stable industry.
Being listed on a foreign exchange market has meant companies have access to fewer US investors, a trend seen within most cannabis startups. US investors aren't as likely to engage in a foreign market they are unfamiliar with, and so it's difficult to secure investment within the country. In addition to having difficulty sourcing local backers, most US banks will not supply traditional business loans due to the federal illegality of the plant.
Additionally, it can be difficult to accept regular payment methods. MedMen accepted credit cards before going public by cloaking payments with a registration under the name of an obscure corporate subsidiary. After going public, debit cards and cash were the only accepted payment types. Normally, a business in such a catastrophic position could seek federal bankruptcy protection, but because of weed's legal status, that option is unavailable to MedMen.
In the year leading up to March 21, 2020, the United States Marijuana Index fell by more than four-fifths. Even though overall sales have increased during the coronavirus pandemic, tax relief and support loans are not available to cannabis companies, adding to the market drop.
Las Vegas-based cannabis investor Leslie Bocskor acknowledges that the issues that led to MedMen's demise represent the whole industry. "It's not specific to MedMen," they said. "This is a challenge for anyone."
As the young cannabis industry continues to grow, MedMen should be viewed as a cautionary tale. It is unlikely we have seen the last cannabis company collapse, but rather, we are seeing just how unstable the market can be. As legislation continues to change in the coming years, the industry should find its feet and manage steady growth into the future.
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