MedMen Enterprises (NASDAQOTCBB:MMNFF) has been on a colossal decline, even by pot-stock standards. In just 12 months, MedMen has seen 80% of its valuation wiped from its books.
It's been a big fall for the multi-state cannabis retailer which has been made popular by its open-store layouts, creating experiences similar to what Apple consumers have come to expect at its stores. And with 70 retail licenses and 29 locations already up and running, including in California, Arizona, and several other states, it has become one of the better-known cannabis companies in the country.
Unfortunately, the company has been plagued with problems and the stock is now trading well below its book value and at a new 52-week low. Investors may be wondering if the stock is at a bargain at these levels. Let's take a closer look to see if that's really the case.
The company has been mired in controversy
MedMen can't really blame the cannabis industry for its problems. There's no shortage of issues that have been of the company's own doing -- and that has made investors think twice about whether the stock is a good buy.
Earlier this year, The Los Angeles Times reported that the company's former Chief Financial Officer James Parker was suing MedMen and alleging that a lot of reckless spending was going on. Although Parker was with the company for less than a year, it wouldn't have taken long for someone in that position to have uncovered some serious problems.
And whether you believe they're true or not, there's no denying that the numbers suggest there's been a lot of spending, with the company burning through an astounding $184 million from its operations over the nine months ending March 30.
Later this month, the company will release its year-end financials, where investors will see how much better or worse the situation has become since then. It will be imperative for the company to show some improvement, especially with MedMen continuing to expand, with its most recent sights being set on the Florida market.
The problems at MedMen have also been noticeable in the company's turnover, with some key individuals leaving the organization back in April. What was notable is that according to CNBC, Daniel Yi, a recognizable figure for the company and its Senior VP of Communications for MedMen, was among the resignations. However, the company didn't announce his departure in a press release that it issued at the time.
As if that hasn't been enough drama for investors, earlier this month the company announced that it was abandoning a merger with PharmaCann, a vertically-integrated cannabis operator with a presence in multiple states, including Illinois. The deal was supposed to give MedMen a broader presence across the country and make it one of the largest cannabis companies in the U.S. However, MedMen decided to shift course and in a press release stated that it was looking to "deepen, rather than widen" its reach.
But that wasn't all as the company announced in the same release that it would be getting rid of its latest CFO, Michael Kramer -- who replaced Parker back in December. While the nixed deal will be brushed off as a change in strategy, investors shouldn't ignore the coincidence of announcing the departure of another key executive within the same release, a possible attempt by the company to try and minimize attention on yet another high-profile departure. Not surprisingly, the stock fell as a result of the news.
Is the stock worth the risk?
With so much controversy surrounding MedMen, it would be hard to justify investing in it at this point. Just because the share price has crashed doesn't mean the stock has become a bargain. Until there's more stability from the company and until cash flow shows significant improvement, MedMen is simply too big a risk, at any price point.
There's definitely room for the stock to recover, but that's only if MedMen can avoid all the negative press and poor financial results that have dragged it down thus far -- and that could be a long way from happening. Investors may be better off looking at other marijuana stocks to buy instead.