MedMen, one of several large-scale cannabis retailers that have bankrolled Arizona’s 2020 campaign for adult-use pot legalization, is now leaving the state altogether amid financial woes, it announced last week.
Besides running three dispensary operations, the company invested heavily in the state’s cannabis future, donating $200,000 to the Smart and Safe Arizona initiative to legalize adult-use marijuana between April and September 2019, according to campaign finance reports.
It’s been one of the top corporate donors to the initiative, trailing only Harvest Enterprises Inc., and CuraLeaf, two other dispensary companies that by September had donated about $500,000 and $400,000, respectively.
The Los Angeles-based MedMen Enterprises Inc., said the sale of its three Arizona licenses is part of a larger strategic play to trim extra fat and restore cash.
Slashing its Arizona holdings, which include its three dispensaries in Scottsdale and Tempe, cultivation facilities, and a stake in several cannabis brands, as well as selling a factory in Illinois, will allow for expanded business in California, Nevada, Florida, Illinois, Massachusetts, and New York, the company said.
MedMen is one of multiple North American cannabis corporations that have spent the last decade scooping up retail licenses and focusing on expansion, but have yet to see the returns on those investments. The company was valued at more than $1 billion in 2018, but financial losses and an industry downturn caused its stock values to plummet last year.
As a result, MedMen appears desperately in need of cash.
MedMen only has been in the Arizona medical marijuana market for just over a year, but the multistate operator made a splash in that short time and had seemed to be in the state for the long haul.
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In October 2018, it gained control of Monarch, a cannabis license holder in Scottsdale, for an undisclosed amount of money.
Less than a month later, it announced a $33 million deal to acquire the companies running two dispensaries under the brand name Level Up, based in Scottsdale and Tempe.
Though dispensary licenses in Arizona are technically supposed to be nontransferable and devoid of value, the industry’s workaround to make money has been cleverly designed acquisition deals that sell control of a license and its nonprofit board.
Though some question whether such deals violate the Arizona Medical Marijuana Act, which says licensed dispensaries can’t transfer their income or property to anyone, the deals are common and often rack up price tags of tens of millions of dollars.
But even if MedMen stands to gain millions through the sale of its Arizona property, it could be leaving in the same year that voters approve Smart and Safe Arizona, which would increase the value of controlling a dispensary in Arizona, according to Demitri Downing, founder and president of the state’s Marijuana Industry Trade Association.
“MedMen must really need the money,” Downing said. “I’m not their strategic adviser. But the fact is, MedMen will one day be a national brand and they should protect their right to stay in Arizona.”
Stacy Pearson, a senior vice president for Strategies 360 and a spokesperson for the Smart and Safe campaign, said MedMen’s move won't affect the campaign's fundraising. The company's $200,000 donation, she said, "is all that the campaign expected to receive and concluded their committed financial support."
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To date, Pearson said, the Smart and Safe Arizona initiative has raised over $1.6 million, from 53 donors. Though a fourth-quarter campaign filing is not out yet, the largest donations after the third quarter of 2019 were from dispensary companies Harvest and CuraLeaf.
“I believe that there’s enough interest in getting the Smart and Safe initiative passed that the money will appear,” Downing said.
No deal has been announced yet for the sale of MedMen’s three Arizona licenses, and MedMen didn’t respond to calls or an email requesting comment.
[UPDATE: Pearson's quotes were added about an hour after the initial publication of this article.]