MedMen Downgraded on OTC Marketplace

The OTC took issue with MedMen's lack of timely financial reporting.

The OTC Marketplace Exchange knocked MedMen Enterprises Inc. (OTC: MMNFF) down a notch. The beleaguered cannabis company that at one time claimed to have a billion-dollar valuation is now getting a double-black diamond rating on the OTC.

If you are a skier, you know that double black diamond runs are for advanced skiers and come with risks of injury. On the OTC, it is called the Expert Market.

Restricted Quotes

In the case of MedMen, the Expert Market means that stock quotes are restricted from public viewing.

“OTC Markets Group may designate securities for quoting on the Expert Market when it is not able to confirm that the company is making current information publicly available under SEC Rule 15c2-11, or when the security is otherwise restricted from public quoting,” the OTC said.

Expert Market quotes are distributed only to broker-dealers, institutions, and accredited investors.

“All quotes in this stock reflect unsolicited customer orders. Unsolicited-Only stocks have a higher risk of wider spreads, increased volatility, and price dislocations. Investors may have difficulty selling this stock. An initial review by a broker-dealer under SEC Rule15c2-11 is required for brokers to publish competing quotes and provide continuous market making,” the OTC added.

Lack of Reporting

The main issue the exchange has with MedMen appears to be its failure to stay current on its reporting obligations.

In December, MedMen provided an update, saying: “In addition to the late filing of the Required Filings, as a result of the Required Filings anticipated to not being completed by November 29, 2023, the company does not believe it will be in a position to file its interim financial statements, management’s discussion and analysis and related certifications for the three-month period ended September 30, 2023.”

The company’s chief financial officer assumed that role just six months ago, after the departure of the previous CFO.

The company said that it has auditors working on the statements, but can’t tell investors when they will be ready. MedMen also told investors that it hadn’t taken any steps toward insolvency proceedings. However, the company has been selling off assets.

MedMen said in November that its fiscal year 2022 reports contained misstatements and errors and needed to be corrected. MedMen applied for a management cease trade order under National Policy 12-203 – Management Cease Trade Orders (NP 12-203), which was issued on Nov. 1, 2023, by the British Columbia Securities Commission.

Another was issued on Jan. 5, with the BCSC saying these were the financial documents that needed updating:

  • Interim financial report for the period ended Sept. 30, 2023
  • Annual audited financial statements for the year ended July 1, 2023
  • Management’s discussion and analysis for the periods ended July 1, 2023, and Sept. 30, 2023
  • Certification of annual and interim filings for the periods ended July 1, 2023, and Sept. 30, 2023.

Penny Lane

MedMen is a true penny stock as the shares are selling for one cent. Back in 2018, the stock sold for more than $6 a share.

At one time, MedMen was strutting its stuff – calling itself the Apple of cannabis – but then it got mired in scandal as the founders found themselves tossed from the company. There were multiple lawsuits, but MedMen had a streak of winning its lawsuits no matter had salacious the details were.

The company’s lender Gotham Green continues to own most of the company’s debt, and according to a filing on SEDAR, owns 30% of the Class B shares. Gotham Green as of October 2023, increased its ownership of Class B shares by 2.4% from July 2023.

Gotham Green could be making these moves to take over the company if it goes belly up.

Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Master's degree in Business Journalism from New York University.

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