Cannabis retailer MedMen just posted downbeat earnings, and the new CEO said selling factories and shuttering stores might help turn things around
California cannabis company MedMen posted downbeat financials for the final three months of 2019 on Wednesday afternoon. Revenue was $44.1 million, falling short of every analyst estimate collected by Bloomberg. The company's financial losses also increased. The company has faced a tough year, like many others in the cannabis industry. MedMen's CEO stepped down on February 1, and MedMen laid off about 40% of its corporate workforce in November and December. Click here for more BI Prime stories.
California-based cannabis company MedMen released its earnings report Wednesday afternoon, showing disappointing results as a new top exec takes the helm. MedMen reported revenue of $44.1 million in the last three months of 2019, missing the lowest analyst estimate by almost $4 million, according to Bloomberg. The company lost $35.1 million as measured by Ebitda. MedMen's new interim CEO Ryan Lissack emphasized the pivot the company is taking as he acknowledged the challenges it faces. Lissack said the company would continue to cut costs and focus on what they do best: retail. "MedMen's last chapter was about pursuing growth," Lissack said. " This is a pivotal time for the company, where we can reassess the business." MedMen is closing its Arizona operation and may shutter more stores MedMen is discontinuing its Arizona operations — which includes three retail locations as well as cultivation and manufacturing operations. Company leaders also said they were evaluating whether to temporarily or permanently close other stores they think are not profitable. They are also in "active discussions with a number of parties" to spin off factories in different states, according to CFO Zeesham Hyder. Hyder also said that the company "cannot continue to invest in assets that do not hold short term returns" even if they offer long term benefits. The company said it had cash and cash equivalents at the end of its second fiscal quarter of 2020 valued at $26 million, down from $33.8 million as of mid-2019. Lissack became interim CEO on February 1 when his predecessor Adam Bierman stepped down and faces the challenge of improving its financial performance. "I look forward to transitioning the company into its next chapter, which will be defined by financial discipline and strategic growth to drive long-term value creation for the Company and its stakeholders," he said in a statement. The cannabis industry has faced headwind after headwind in the past couple of months. Multi-state operators have turned away from plans to increase their geographic footprints and instead focused on their current customer bases as capital has withered and stocks have plummeted. A tumbling stock and a canceled deal MedMen's stock has tumbled down from $3.25 to about $0.30. The company's monumental $682 million merger with PharmaCann fell apart in October. "The initial wave of investors that went after this market has been tapped out or exhausted," Marc Hauser, the vice chair of the law firm Reed Smith's cannabis team told Business Insider's Jeremy Berke after the merger's collapse was announced. "Companies are having a much harder time raising capital than just 12 months ago." MedMen also cut around 40% of its workforce late last year, including 80 corporate-level employees, in an attempt to save cash as investments in the industry have slowed down. MedMen has also seen an ongoing shakeup at the executive level in the past year. Departures include: David Dancer, the company's chief marketing officer, Chief Operating Officer Ben Cook, General Counsel Lisa Sergi Trager, and Daniel Yi, the senior vice president of corporate communications. Former CEO Bierman was the most recent to depart. Before his exit, Bierman told Business Insider that investors were right to punish MedMen's stock, but that he was working on a turnaround along with the help from FTI Consulting, a business advisory firm, to try and get its finances back on track. "The investor community and the Street — they don't really get anything wrong," Bierman told Business Insider in January. "If our stock is trading at a tremendous discount to our peer set, there's a reason for it."Join the conversation about this story » NOW WATCH: Behind the scenes with Shepard Smith — the Fox News star who just announced his resignation from the network
More like this (3)
Cannabis company Acreage just cut 40 jobs following a strategic review, and it's the latest sign of a tough environment for cannabis sellers
Acreage Holdings eliminated 40 positions after a strategic review of the company's spending. The company posted...Acreage Holdings eliminated 40 positions after a strategic review of the company's spending. The company posted disappointing fourth-quarter earnings, amid a tough market for cannabis companies. An Acreage spokesperson told Business Insider that the company is also hiring for a number of open roles. Click here for more BI Prime stories. Multi-state cannabis company Acreage Holdings eliminated 40 positions earlier this week in a strategic reassessment of its spending, a source familiar with the matter said. The source added that the job cuts were across the organization and not concentrated in one specific team or department. Acreage Holdings has well over 250 employees, a company spokesperson said. Reports of the job cuts first surfaced on Twitter on Tuesday from @BettingBruiser, who posted a snippet of a memo circulated to Acreage employees. Business Insider then reviewed a full copy of the memo. "In releasing our corporate strategic objectives, I shared with you that we would be faced with many decisions that will be straightforward, while others may be very difficult," the memo, signed by Acreage Chief Operating Officer Robert Daino reads. "Well, today we made some of those very difficult decisions as we notified a number of our colleagues across our organization that their employment has been eliminated as of today. These decisions, while difficult to communicate, were necessary." 'This is a tough day' "This is a tough day, but the executive team and I are counting on you to come together as an integrated team, laser-focused upon our objectives, and passionate about executing with precision," the memo said. After viewing the memo, Business Insider reached out to Acreage directly to confirm the details. An Acreage spokesperson said the company is still hiring for a number of open positions and that the cuts were about eliminating positions that aren't necessary anymore as the company transitions from an investment fund to an operator. A search of Acreage's website revealed open listings for positions in roles including cultivation, dispensary sales, and retail operations. "As the life cycle of our business continues to mature, we continually assess our resources against our corporate strategic objectives," Acreage Vice President of Communications Howard Schacter said in a statement. "When we conducted our last assessment we identified functions across certain departments and in our Form Factory business unit in places that are not as critical today as when they were first acquired." Acreage is still hiring in some areas "At the same time, we've identified strategic areas where we've decided to make new hires," Schacter said. The company has recently made two senior-level hires, including a chief revenue officer. Founded as High Street Capital Partners in 2014 by Kevin Murphy — who remains CEO — the company shifted its model from an investment fund to a cultivator and operator of cannabis dispensaries in states with legal medical and recreational marijuana in 2017. Last April, Canadian cannabis giant Canopy Growth entered into a conditional agreement to purchase Acreage if, or when, federal legalization occurs in the US. According to the announced deal terms, the agreement will be terminated if in seven years a federally legal pathway to close doesn't emerge. Acreage reported its fourth-quarter earnings on Wednesday, which include a $50.5 million loss while bringing in $21 million in revenue — well below most analyst estimates. The company attributed the losses to delays in cannabis store openings across the states it operates in a call with analysts and investors. The stock fell after a disappointing earnings report Cowen analyst Vivien Azer lowered her estimate for Acreage and maintained her market perform rating on the stock. "ACRG continues to demonstrate the difficulties associated with an overly broad geographic presence which has driven the company's lower margins and bloated cost profile, though ACRG does have a proven ability to raise capital with its most recent $150 mm financing transactions," Azer wrote in a note on Wednesday. The stock fell over 9% on Thursday. Acreage is far from the only publicly-traded cannabis company to eliminate positions in recent months. Business Insider has identified over 2,000 layoffs across the cannabis industry since last Fall. Read more: Field Trip raised $8.5 million to take psychedelic medicine mainstream. We got an exclusive look at the pitch deck that helped make it happen. Wall Street's top cannabis analyst just leveled a stark warning. Here are the 3 stocks to avoid, and 1 to buy instead. A group of cannabis investors just raised $225 million to buy up real estate in a tough market. Here's how they put the deal together. The CEO of cannabis giant Aurora just stepped down and the company is cutting 500 jobs as turmoil hits the industry Join the conversation about this story » NOW WATCH: What's inside these 8 unique creatures
2019 was the year the cannabis bubble burst. We talked to more than a dozen top cannabis execs about what's next.
The cannabis bubble, propped up by a thriving market for reverse takeovers on the Canadian Securities...The cannabis bubble, propped up by a thriving market for reverse takeovers on the Canadian Securities Exchange, has burst. Business Insider spoke with over a dozen top CEOs and execs about the industry's prospects. They said that while the shakeout is here — and some companies will likely fail — the business will turn around. The current period of low valuations provides an opportunity for savvy investors to put money to work, and for stronger companies to buy up their rivals, executives said. Click here for more BI Prime stories, and subscribe to our weekly cannabis newsletter, Cultivated. 2019 was the year that the nascent legal cannabis industry crashed directly into the floor. A year that began with a flurry of multibillion-dollar deal announcements, companies going public, and shareholders getting rich on paper ended with thousands of layoffs, deals canceled or reduced in scope, CEOs fired, and capital-markets turmoil. "Dot-com", as in the crash that ended the tech boom of the 1990's, has become a common refrain in countless conversations with industry insiders. "I think it's exactly what happened to tech as far back as the eighties and nineties," Green Growth Brands CEO Peter Horvath told Business Insider in an interview last week. In other words, over a dozen cannabis CEOs and C-suite execs Business Insider spoke for this story said that there wasn't a shakeout coming — the shakeout is already here. For the companies that survive, this era of crashing stock prices will be seen as a small blip on the path to global domination, they said. They said that while some companies will fail, the current period of low valuations provides an opportunity for savvy investors to put money to work, and for stronger companies to buy up their rivals. Read more: Layoffs, cratering stocks, and blown-up deals: 11 experts take us inside the cannabis industry's meltdown and tell us where the industry goes from here Curaleaf, a cannabis cultivator and retailer, was forced to reprice a near-billion dollar deal to acquire the Select Brand of cannabis products from Cura Partners, and its other marquee deal, an acquisition of Grassroots Cannabis, is expected to close "early next year," CEO Joe Lusardi said. The company's stock changed hands for more than $11 a share earlier this year, though it's now trading for half that, around $5.35 Still, Lusardi said that 2019 "was the best year in company history." In an interview on the sidelines of MJBizCon in Las Vegas, he pointed out that more people are coming into stores and buying cannabis legally every day in the US and around the world, and said the US is "on an amazing growth trajectory." He blamed the company's stock gyrations on the fact that Curaleaf, like other companies that cultivate and sell THC-containing products in the US, trades in Canada, and is being weighed down by disappointing financial results across the sector. Lusardi said he expects to see even more consolidation among smaller players in the industry, in a push to survive a tough market. "I think you will likely see companies banding together because in this case, being big and having scale is helpful and you can spread your costs over a bigger operating base and be more efficient," says Lusardi. And while Lusardi said the past few years were focused on making acquisitions, securing licenses, and building out infrastructure, "2020 we'll be focused on building a proper CPG [consumer packaged goods] business." A classic tale of irrational exuberance To Green Growth Brands CMO Jann Parish, cannabis in 2019 is a classic tale of market exuberance, pegged to the attractive story of taking what was once a demonized, illegal drug and leveraging the wheels of capitalism to turn it into an upscale consumer product. "I think that there was a kind of irrational exuberance when the business of cannabis became relatively more mainstream and you saw the markets open up," Parish said. Steve White, the CEO of Harvest Health & Recreation, said there's a "mismatch" between the fundamentals of his business and share prices in the wider cannabis industry because many big investors can't own shares in cannabis firms. "Large institutional investors can't play US cannabis," White said on the sidelines of MJBizCon in Las Vegas last week. "You're going to have an imperfect market determining the price of shares when you have an artificial constraint on demand. It's a simple supply-and-demand question." While White sees the M&A among cannabis companies slowing next year, he says there will be an opportunity for companies to scoop up distressed assets in the industry. "It's hard because when your share price is down, you can't use stock as currency the same way you could," White said. "The flip side of that coin is you'll find some distressed assets that are available and I think people will take advantage of those opportunities to the extent they can." Shareholders and investors have gone from unbridled excitement to wanting to see concrete results, execs say Cannabis, by nature, is a capital intensive business. So once analysts and shareholders started looking at companies to actually generate returns, and not just spend money to acquire licenses and build out cultivation facilities, operators found themselves in trouble, Horvath said. "The narrative has moved from, 'Who can accumulate the most assets,' to 'Who can make the most money,'" he said. More than one executive brought up, in some form or another, the Gartner Hype Cycle of emerging technologies, and pointed out that we've slid well past the "peak" into what's known as the "trough of disillusionment," where a slew of negative press, supply chain issues, and capital constraints weighs on share prices in any new industry, whether its software or cannabis. From here, things are only going to get better, Green Thumb Industries CEO Ben Kovler told Business Insider in an interview last week in Las Vegas. Read more: Some cannabis stocks now have the green light from US wealth managers like Morgan Stanley, Merrill Lynch, and Wells Fargo. We have details on firms' policies. "Companies that are focused on their stock price are focused on the wrong things. We view this as a long term game," Kovler said. "Next year, it's all about execution, execution, execution." In terms of capital markets, Kovler said he's not surprised at what he's seeing. "If we can continue to put up good numbers, the stock price will ultimately find the right level, but we can't worry about where it goes now or the next month — or the next three or six months." Andy Grossman, a hedge fund veteran and Green Thumb Industries' head of capital markets, sees a slew of missteps on his competition's part. "The companies around us are running out of cash," Grossman said. "They're doing deals — they don't have cash for them. So you're seeing deals break, you're seeing things get cut. We operate very differently and we have to pay attention to it." 'There's pain to come', but the market will get more efficient in 2020 When asked about his predictions for cannabis in 2020, Kush Bottles CEO Nick Kovacevich said there will be a shakeout on the private side as well. "There's a ton of companies and the majority of them are raising money and they need money," Kovacevich told Business Insider on the sidelines of MJBizCon in Las Vegas. "And there's just simply not enough active cannabis investors to support the sheer amount of capital needed." What will happen, says Kovacevich, is that some companies will be forced to shut down, benefiting the stronger companies that remain, he said. To Chris Walsh, the incoming CEO of Marijuana Business Daily — an industry intelligence platform that hosts the MJBiz conference and has an editorial department as well — the long term outlook for cannabis is great. "But there's pain to come," he said. "To survive, you're going to need a good source of funding, a realistic understanding of the market, and set reasonable growth targets." That being said, Walsh sees lots of companies that will "end up being victims of circumstance" and lots of room for distressed asset sales. Read more: Venture funds have poured close to $2 billion into cannabis startups this year. But top investors are starting to get wary as headwinds mount. Tim Leslie, the CEO of cannabis information site Leafly, said he isn't worried about the cannabis market. Leslie, who took over as Leafly's CEO earlier this year, was forced to pare back expenses at the company but said that things are on the right track for 2020. "I think coming into 2020, you'll actually see more investment dollars," says Leslie. "Investors will take losses for tax purposes, but they'll come in with a clean slate. And valuations — many of which were too high to begin with — will fall." Reduced valuations, at least in the private market, might provide a new entry point for venture capital investors, Leslie said. The same can be said for the public markets, said Beth Stavola, the chief strategy officer of iAnthus Capital, a New York City-based cannabis company. "If you have the capital, and you haven't lost your shirt in the markets yet, it's a screaming opportunity right now," Stavola said. "I just think that there's a lot of scared money right now, but those that are actually going out there and deploying capital are going to make a ton of money for their investors." Read more: A cannabis startup backed by Tiger Global just swapped its longtime CEO for a tech-industry veteran. We got the first interview with the new exec. A VC who runs a $200 million cannabis fund told us why China is the next big frontier for cannabis and hemp The world's largest cannabis company has a new CEO, and Wall Street is betting it's a sign that Canopy Growth's investors aren't willing to wait for results to improve Wall Street stock traders are piling into bets against cannabis stocks, even as shares have plummeted Join the conversation about this story » NOW WATCH: WeWork went from a $47 billion valuation to a failed IPO. Here's how the company makes money.
A British oil stock tanked 60% after the shock resignation of the CEO and head of exploration | Markets Insider
Tullow Oil, a British oil company, tanked on Monday morning after the company announced the resignation...Tullow Oil, a British oil company, tanked on Monday morning after the company announced the resignation of its CEO and exploration director as well as cutting its production guidance. Tullow's board also suspended its dividend. As of Friday's close, Tullow Oil's market cap was just under $1.2 billion (£890 million). The stock tanked 60% in the first hour of trading in London, wiping over $700 million (£534 million) from its market cap. View Business Insider's homepage for more stories. Tullow Oil, a British oil company, tanked on Monday morning after the company announced the resignation of its CEO and exploration director as well as cutting its production guidance. Tullow's board also suspended its dividend. As of Friday's close, Tullow Oil was worth just under $1.2 billion (£890 million). The stock tanked 60% in the first hour of trading in London, wiping over $700 million (£534 million) from its market cap. The oil company announced on Monday that its CEO, Paul McDade, and Angus McCoss, exploration director resigned with immediate effect, and the firm will cut production guidance for this year and 2020. "We are taking decisive action to restore performance, reduce our cost base and deliver sustainable free cash flow," the company said in a statement announcing the changes. "A number of factors have been identified that have caused this reduction in production guidance," including "significantly reduced offtake of gas by the Ghana National Gas Company," as well as "increased water cut on some wells, and lower facility uptime," the company said in the statement. Dorothy Thompson will now move to the executive chair on a temporary basis among as part of other moves at the top of the company. Thompson added that the board was disappointed with the financial performance of the company and was reviewing operations. "A full financial and operational update will be provided at Tullow's Full Year Results on 12 February 2020, with an update on progress to be given in the Group's Trading Statement on 15 January 2020." Watch oil trade live here.Join the conversation about this story » NOW WATCH: A big-money investor in juggernauts like Facebook and Netflix breaks down the '3rd wave' firms that are leading the next round of tech disruption