MedMen Raises $120 Million With Canacccord

MedMen Enterprises Inc. (CSE: MMEN) is looking to raise some extra cash. On November 19, 2018, MedMen announced that it has entered into a letter of engagement with Canaccord Genuity Corp. Under the agreement, Canaccord has agreed to purchase, on behalf of a group of underwriters, 17,648,000 units of the company on a bought deal basis. At a price of $6.80, the gross proceeds of the offering amount to $120,006,400.

Although the company reported roughly $40 million in annual revenue, its operating costs have been staggeringly high. In the fourth quarter alone, MedMen’s operating expenses were $72.6 million. For the year, the company’s net loss and comprehensive net loss were around $112 million.

Executives at the company attribute the high operating costs to significant investments in the company’s long-term strategy by building up personnel and company infrastructure. In the fourth quarter, MedMen incurred a series of high one-time expenses; including the company’s RTO ($2.7 million), acquisition-related costs ($3.5 million), and $30.8 million in non-cash stock compensation and employee incentive plan expense. Despite these costs, the company’s balance sheets still look favorable, with cash and cash equivalents of $79.2 million and total debt at $56 million.

In addition to the initial offering, MedMen has agreed to grant the underwriters an over-allotment option to purchase another 2,647,200 units at the issuing price. Underwriters may exercise the option to acquire units, Class B Shares of the company, and/or warrants.

A unit constitutes one Class B Subordinate Voting Share and one-half of one Class B share purchase warrant. Each purchase share unit entitles the holder to purchase one Class B share at a price of $10 for up to three years following the closing of the offering.

The option is exercisable up to thirty days following the closing of the offering. If exercised, the option will generate an additional $18,000,960; raising the proceeds of the offering to $138,007,360. The offering is expected to close on or around November 30, 2018.