MedMen Enterprises Inc. (CSE: MMEN) (OTCQX: MMNFF) announced that its Co-Founder and Chief Executive Officer Adam Bierman is stepping down as CEO effective February 1, 2020. Bierman is also giving up all of his Class A super voting shares as part of the deal.
After giving up these shares, MedMen said that Bierman will have 1,893,047 Subordinate Voting Shares and 3,956,324 redeemable shares of MM CAN USA, Inc., each of which is redeemable for one Subordinate Voting Share. Bierman will own 4.8% of the company with an equal amount of voting power.
Bierman’s Co-founder Andrew Modlin has granted a proxy of all of his Super Voting Shares to the company’s Executive Chairman, Ben Rose until December 2020. Mr. Modlin has also agreed to surrender all of his Super Voting Shares to the company, which would occur upon the expiration of the proxy granted to Mr. Rose. Modlin will own 4.9% of the company with an equal amount of voting shares.
Readers may recall that when MedMen went public, the company faced a storm of criticism that the two leaders essentially gave themselves total control of the company with the bulk of the voting shares. New shareholders basically had no say in the company and had no way to voice displeasure in the running of the company as they had no way to vote.
Lissack Named Interim CEO
MedMen’s Chief Operating Officer & Chief Technology Officer, Ryan Lissack was named Interim CEO. The Board of Directors has said that it is forming a committee to identify and appoint a new CEO. Bierman has agreed to continue to serve on the Company’s board of directors, including as part of the board to be elected at the Company’s upcoming shareholder meeting.
“The Board supports both Adam’s decision to step aside for a new CEO to lead the Company, and his and Andrew’s decision to surrender their voting rights to give all shareholders a stronger voice. This evolution will provide Adam the space to contribute to the future of MedMen and extend his commitment to the industry that he has helped pioneer,” said Executive Chairman Ben Rose.
“I continue to believe that MedMen is positioned to thrive. It’s time for our next iteration of leadership to capitalize on the opportunity we have created. This has been an incredible journey and I will continue to be inspired by those around the globe working to make our world safer, healthier and happier through access to legal, regulated cannabis,” said Adam Bierman.
MedMen’s most recent stumble was its inability to pay vendors. When the news first began leaking out from companies stating that their bills were not getting paid and that the company was negotiating payment, MedMen claimed the stories were “not factual.” However, Bierman did concede to Green Market Report that in fact, the stories were true.
The company has faced criticism for his extreme spending habits and its insatiable need for more capital. That most recent rounds of funding though came at the cost of overseeing the management of the company.
Constant Crisis in C-Suite
MedMen seemed to constantly be putting out fires in the C-Suite and many of its own making. MedMen originally began as an investment company, but then it pivoted to become a retailer and described itself as the Apple store of cannabis. The stores became known for slick interiors and styling – the opposite of a “head shop.”
The company’s IPO though was awash in controversy and from day one, it seemed the company could never operate on stable ground. The hubris of awarding the majority of the voting shares to the founders was topped by the billion-dollar valuation for a company that only brought in low double-digit millions in revenue.
It seemed scandal after scandal engulfed the management. There was the employee tax issue, where employees were hit with a lower paycheck, which was blamed on a miscalculation of taxes due to the fast growth of the company. That was followed by a $20 million shareholder lawsuit.
The lawsuit claimed, “The MedMen veneer is a complex web of interconnected subsidiary entities, virtually all of which are directly managed, directed, controlled, and owned by BIERMAN and MODLIN, and all of which always pursue the best interests of BIERMAN and MODLIN, rather than the best interests of any stakeholder or entity. It is that perverse interconnectedness and rampant, brazen self -dealing that renders the actions of BIERMAN and
MODLIN, and of the Entity Defendants, unlawful.”
That lawsuit was small potatoes compared to the explosive allegations
from former CFO James Parker. Parker resigned from the company in November less than a year after the company began trading on the Canadian Securities Exchange following a reverse take over. It’s highly unusual for a company to experience a change at this level so quickly after becoming a publicly-traded company.
Parker says that he to “Choose between complying with his fiduciary duty to the company and its shareholders or turning a blind eye and a deaf ear to improper and unlawful behavior, he had been constructively and wrongfully terminated without cause and in violation of public policy.” Parker claims MedMen went behind his back to begin searching for a new CFO and diminished his authority within the company. He also complained that the company instructed him to make payments that he questioned.
Parker also made serious securities violation claims saying:
- “Ordering Plaintiff to wire hundreds of thousands of public dollars to a “consultant” in Canada to “buy up our stock when it is under attack”
- “Ordering Plaintiff to pay prohibited success fees to unlicensed broker-dealers for various fundraising efforts, under the semblance of “consulting agreements”
- “The CEO and President not being fully transparent about non-arm’s length deals with numerous related parties (including Pharmacann and Captor Capital)”
- “The CEO and President failing to publicly disclose all Named Executive Officers and other Material Officer compensation packages (in violation of Canadian National Instrument Form 51-102 F6 which requires that the compensation of the CEO, CFO and next three highest-paid executives be publicly disclosed)”
The company had also made a lot of noise about its impending acquisition of PharmaCann and how that deal would make it the largest multi-state operator in the country, but the deal was never closed and was recently terminated.