Embattled California cannabis company MedMen announced on Friday that CEO and co-founder Adam Bierman will step down effective Feb. 1. He will also surrender his supervoting shares, relinquishing control of the company back to shareholders.
“I continue to believe that MedMen is positioned to thrive. It’s time for our next iteration of leadership to capitalize on the opportunity we have created. This has been an incredible journey and I will continue to be inspired by those around the globe working to make our world safer, healthier, and happier through access to legal, regulated cannabis,” Bierman said in a statement.
The move comes amid financial turmoil for the Los Angeles-based cannabis brand. Just last week, a series of emails surfaced that purported to show MedMen had stopped paying its vendors. Bierman later verified the authenticity of the communication.
At the time, he told Green Market Report's Debra Borchardt "We've been very forthright with the public, and with our investment community at large about the fact that at the end of last year we entered into a restructuring in the business, exiting the hyper-growth stage of the business, and getting into sustainability, and with that, there’s a lot of pain."
That "pain" translates to layoffs of about 40 percent of the company's employees, the termination of its $682 million PharmaCann acquisition, and the selloff of non-core assets. But some investors worry that won't be enough to right the financial mismanagement that contributed to losses of $277 million in 2019, more than double the $113.8 million in losses the company reported in 2018.
This latest news brings to a head turmoil that has swirled around the company since it went public on the Canadian Securities Exchange in 2018. At the time, MedMen raised eyebrows for implementing a complicated share structure that gave Bierman and President Andrew Modlin control over the company ー although, with the recent announcement, their grip over the company has loosened.
"The Board supports both Adam’s decision to step aside for a new CEO to lead the Company, and his and Andrew’s decision to surrender their voting rights to give all shareholders a stronger voice," Executive Chairman Ben Rose said in a statement on Friday.
The executives were also criticized for enormous compensation packages, as well as for irresponsible spending habits. In January 2019, former CFO James Parker filed an incendiary lawsuit accusing the executives of lavish spending habits and creating a hostile work environment. Parker alleged Modlin and Bierman ordered him to use company money to fund private jets, luxury vehicles, and armed security for the two and their families. Parker's successor, Apple Retail veteran Michael Kramer, lasted less than a year before Zeeshan Hyder, an internal candidate, stepped into the role.
MedMen stock surged more than 7 percent after the announcement. The cannabis brand is expected to report earnings Feb. 26.
MedMen's situation may be extreme, but it's hardly rare. As investor sentiment around cannabis stocks has chilled in the face of overvaluation and underperformance in key markets, many companies have found themselves cash strapped and swimming in debt. But stakes are higher for U.S. companies, which unlike their Canadian counterparts, don't have the option of federal bankruptcy protection because of the illicit nature of their industry.
