California-based MedMen’s attempts to renegotiate payment terms with vendors – including the use of equity for those payments – raises some big questions about the health of the multistate operator.
MedMen (OTC:?MMNFF) confirmed to?Marijuana Business Daily?that the negotiations are part of an ongoing restructuring, but this move is worrisome for shareholders.
As a retailer, MedMen needs?to secure inventory to generate cash flow, and its inventory and payables have already soared through September.
Using equity to pay suppliers opens MedMen shareholders to even more dilution on top of the 607 million shares currently outstanding – and it is not a standard industry practice for retailers.
The company’s stock price has fallen 25% since the rumors of renegotiation emerged.
The only potential positive interpretation is that management is using greater buying power to push for better terms from suppliers.
But the working-capital analysis?shows the issue is the increasing inventory and that MedMen has already pushed vendor terms pretty hard.