MedMen Stock Halted After Company Changes Terms Of Capital Raise

MedMen Enterprises (MMNFF) stock was halted for trading following the company’s amended capital raise terms. The company began trading back in May to great fanfare as the first U.S. cannabis unicorn. While some industry insiders groused about the billion dollar valuation, subsequent generous valuations seemed to signal that MedMen was just the first of many in the billion dollar club.

Still, MedMen went on to raise another C$86.3 million in September in a bought deal with units priced at C$6.87. This was followed up by an additional sale on November 9, 2018, of C$120 million of subordinated voting share units priced at C$6.80.  MedMen announced that it had 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.

Price Drop Forces Change

Then the bottom fell out and the stock plunged to as low as C$5.39. Last Friday, MedMen decided to amend the terms of the deal to issue to the underwriters 13,640,000 units at a price per unit of $5.50 for gross proceeds of $75,020,000.  Each unit will be comprised of one Class B Subordinate voting share of MedMen and one Class B share purchase warrant. The exercise price for each warrant was amended to $6.87 per warrant and the warrants are exercisable for a term expiring on September 27, 2021.

The stock trading was halted as the IIROC (Investment Industry Regulatory  Organization of Canada) worked through the changes. Late on Monday, MedMen said that it had been issued a receipt by the applicable Canadian securities regulatory authorities for its preliminary prospectus dated November 16, 2018 in connection with its offering of 13,640,000 units, at a price per unit of $5.50 , for gross proceeds of $75,020,000 , to be issued and sold on a bought deal basis to a syndicate of underwriters, led by Canaccord Genuity Corp., and including Eight Capital and Cormark Securities Inc.

“We pride ourselves on our investability and we create more goodwill every day we wake up, execute on our business plan and generate outsized returns for investors,” said Adam Bierman, chief executive, and co-founder.  “The bought deal we entered into with Cannacord on November 9 came as a result of the relationship we have built with our shareholders and the investment community.  Shortly after the announcement, the global market experienced a significant sell-off and as we ended last week the investors that bought that deal would have been underwater. That did not sit right with us and accordingly, we initiated a discussion with Cannacord about repricing the deal, to ensure our investors would be buying the deal based on an offering ripe for the returns we constantly seek to create.  Cannacord was a willing and excited partner in fleshing out our options and per the press release Nov 16^th the deal has been revised.”

In addition to the change in the deal, MedMen announced that its Chief Financial Officer James Parker resigned and that the company’s Vice President of Accounting Jim Miller had been appointed interim CFO. Miller joined MedMen in January 2018. Prior to joining MedMen, Miller held several senior finance and accounting positions at leading entertainment firms such as the Walt Disney Company and Viacom.