• Skip to main content
  • Skip to primary sidebar
  • Skip to footer
  • HOME
  • NEWS+OPINIONS
    • NEWS TO US
    • COLUMNS
      • APPARENT HORIZON
      • DEAR READER
      • Close
    • LONGFORM FEATURES
    • OPINIONS
    • EDITORIAL
    • Close
  • ARTS+ENTERTAINMENT
    • FILM
    • MUSIC
    • COMEDY
    • PERFORMING ARTS
    • VISUAL ARTS
    • Close
  • DINING+DRINKING
    • EATS
    • SIPS
    • BOSTON BETTER BEER BUREAU
    • Close
  • LIFESTYLE
    • CANNABIS
      • TALKING JOINTS MEMO
      • Close
    • WELLNESS
    • GTFO
    • Close
  • STUFF TO DO
  • TICKETS
  • ABOUT US
    • ABOUT
    • MASTHEAD
    • ADVERTISE
    • Close
  • BECOME A MEMBER

Dig Bos

The Dig - Greater Boston's Alternative News Source

In The Red: Med Men Needs An Ambulance

Written by DAVID RABINOVITZ Posted February 8, 2023 Filed Under: Cannabis, Talking Joints Memo

Some cannabis highflyers are stumbling. Could this be the first MSO to fail?


I jumped into the cannabis race full-time in the summer of 2018. By early 2019, I was well into a marathon. That March, I attended NCIA-Boston and ran into Jimmy Young, who had recently launched Pro Cannabis Media. We stood at the back of the main speaker hall and watched as the keynote took the stage. A young good-looking guy (the keynote, not Jimmy) from MedMen strutted out like a rock star to applause, then dumped himself down onto the couch like an award-winning actor visiting Oprah.

I turned to Jimmy and whispered, That guy’s an asshole. He was going to be the Apple of weed. The disconnect is that Apple is a tech company that does cool things. Cannabis, on the other hand, is a plant that has survived thousands of years despite near worldwide eradication efforts. Antagonist Harry Anslinger referred to the plant as something that grows like weeds in a roadside ditch. I listened to about 90 seconds of his bravado and whispered to Jimmy, He’s gonna lose a lot of people a lot of money.

Over the next couple of years, I watched in amazement as MedMen raised more and more money and did dumber and dumber things. Fortune magazine just reported that the “cannabis chain once worth $1.7 billion and called the ‘Apple store of weed’ is now nearly failing.” (In Boston, their shop is across from Fenway Park). With only $15.6 million in cash (versus $137.4 million in debt), the company has indicated it might not be able to survive the year (in business, this is referred to as a “going concern” warning). Their stock has traveled from $8 to 4 cents. Even penny candy costs a dime these days.

Cannabis highflyers are stumbling and failing. The cause of the timing is capital markets and investor rationality. Markets are tight, capital is scarce, and investors are no longer willing to bet on an uncertain future. As a result, businesses that spent with reckless abandon to create redundant national footprints (does an operator really need a $10 to $20 million cultivation facility in every market?) could no longer fund the deficit cash flow. These large operators turned to the federal government for funding by simply not paying their federal taxes (see Green Market Report’s coverage of the Top-10 multistate operators that owe $507 million in back taxes), but that just saves money going out—it doesn’t bring in fresh capital.

With continued overdevelopment of costly and short-lived indoor cultivation facilities (the underlying culprit), markets are now awash in excess inventory driving prices downward and crushing companies that are not at least cash-flow neutral. Furthermore, we are on the cusp of the first wave of interstate commerce becoming reality. Many indoor cultivation facilities will not survive.

A reporter called me the other day and suggested that with the current market turmoil, only the large will survive. When I countered that the largest players could be the first to fall—they have deficit cash flow and lack access to capital—his ears perked up. Last week, the big news story was Curaleaf exiting several western states. What no one picked up on, though, is the double whammy Curaleaf will experience …

Because of cannabis’ illegal federal status, operators have limited deductions for federal tax purposes. Rent for space used to produce a product is tax deductible. Cultivation operations are nearly fully tax deductible—if they are producing. Idle a cultivation facility and the operator still must pay rent, but if there is no production, that rent is not tax deductible. Hence, closing a $30,000 per month rent facility doesn’t just cost the $30,000 of continued rent (landlords expect to be paid throughout the lease term whether the property is used or not), it likely costs substantially more because idle facilities have to be paid with after-tax dollars in cannabis. Weaker operators are about to learn the meaning of the expression, Damned if you do and damned if you don’t.

Barring someone pulling a white rabbit cleanly out of their backside to save time, MedMen may be the first MSO to fail. The beanstalks are falling, and the giants may soon come crashing to the ground.


 

David Rabinovitz
DAVID RABINOVITZ
+ posts

David Rabinovitz is a cannabis business consultant in Massachusetts and involved in various cannabis ventures. He is a former Director and Treasurer of MassCann (the Massachusetts Cannabis Reform Coalition), a past Trainer for the Massachusetts Cannabis Control Commission Social Equity training program, and the original host of The Green Rush cannabis business talk show on ProCannabis Media. David speaks at various industry events on creating winning financial presentations that investors love. David’s industry insights and analysis are featured in several media outlets. Connect with David on LinkedIn at https://www.linkedin.com/in/davidrabinovitz/ or reach out to him at drabinovitz@gmail.com or DavidR@CannaVentureLabs.com

  • DAVID RABINOVITZ
    https://digboston.com/author/david-rabinovitz/
    The Importance Of Putting Pot Prospects In Perspective
  • DAVID RABINOVITZ
    https://digboston.com/author/david-rabinovitz/
    The Contagion Continues: Could The Cannabis Goliaths Start Falling?
  • DAVID RABINOVITZ
    https://digboston.com/author/david-rabinovitz/
    Could Slow Growth Lead To a Quick Death In Cultivation?
  • DAVID RABINOVITZ
    https://digboston.com/author/david-rabinovitz/
    Forget About Cashless ATMs—But You Still Might Not Need Cash in a Dispensary

Filed Under: Cannabis, Talking Joints Memo Tagged With: business, Dispensaries, NECANN, New York, news

WHAT’S NEW

State Wire: Funds Aim To Support Municipalities With Expanded Mail Voting

State Wire: Funds Aim To Support Municipalities With Expanded Mail Voting

Parks & Checks: Wasteful, Opaque Bookkeeping At Two City Of Boston Nonprofit Arms

Parks & Checks: Wasteful, Opaque Bookkeeping At Two City Of Boston Nonprofit Arms

Surf’s Upcycled: Meet The Bay State Surfers Conserving The Oceans Where They Ride

Surf’s Upcycled: Meet The Bay State Surfers Conserving The Oceans Where They Ride

State Wire: Public Supports Changes To High-Stakes Testing For Mass Students

State Wire: Public Supports Changes To High-Stakes Testing For Mass Students

State Wire: White Supremacist Gatherings, Incidents Hit All-Time High In New England

State Wire: White Supremacist Gatherings, Incidents Hit All-Time High In New England

State Wire: Protests, Construction Continue at East Boston Substation

State Wire: Protests, Construction Continue at East Boston Substation

Primary Sidebar

LOCAL EVENTS

AAN Wire


Most Popular

  • Does Massachusetts Underestimate Its Greenhouse Gas Emissions?
  • The Most Expensive Massachusetts City For Car Insurance (No, It’s Not Boston)
  • If You Find A Mini Felted Animal Around Boston, This Is Where It Came From
  • Photo Dispatch: “Ukraine Day” Rally In Boston’s Copley Square
  • As Prices Soar, Fossil Fuel Industry Looks After Its Interests On Beacon Hill

Footer

Social Buttons

DigBoston facebook DigBoston Twitter DigBoston Instagram

Masthead

About

Advertise

Customer Service

About Us

DigBoston is a one-stop nexus for everything worth doing or knowing in the Boston area. It's an alt-weekly, it's a website, it's an email blast, it's a twitter account, it's that cool party that you were at last night ... hey, you're reading it, so it's gotta be good. For advertising inquiries: sales@digboston.com To reach editorial (and for inquiries about internship opportunities): editorial@digboston.com