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Why MedMen, ‘The Apple of Cannabis,’ Tanked ~7% on Wednesday

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Jan. 10 2019, Published 8:02 a.m. ET

MedMen

MedMen (MMNFF), the American cannabis producer and retailer, continued to trade on a negative note for the third consecutive session on January 9. On Monday and Tuesday, the stock settled with 1.9% and 1.0% day losses, respectively, but the stock fell a steep 6.8% on Wednesday. Let’s take a closer look at the possible reasons behind this drop.

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Recent negativity about MedMen

After markets closed on January 8, two of its big investors, Brent Cox and Omar Mangalji, sued MedMen for “alleged breaches of fiduciary duty.” Cox, who was also a board member for the company from March 2016 to March 2018, said in a press statement, “we are backed into a corner here and compelled to take action on behalf of all stakeholders.”

The second investor alleged that MedMen “is withholding its shares from its shareholders. Management is using conflicted corporate structuring in breach of its fiduciary duty to its shareholders.” He went on to suggest that the company “need to adopt mainstream corporate governance practices” as it “touts itself as a torchbearer of best practices.” This news hurt MedMen investor sentiment, which was the primary reason for the stock’s massive 6.8% drop on Wednesday.

MedMen’s response

Later on January 9, MedMen also released a response saying, “Mr. Mangalji and Mr. Cox have already received cash distributions representing a complete return of their capital plus a substantial gain. It’s unfortunate that Mr. Mangalji and Mr. Cox have chosen this path.”

MedMen is known as “the Apple of cannabis.” This terminology was used by Canadian cannabis company Cronos Group (CRON) last year when they partnered with MedMen to form a joint venture known as MedMen Canada.

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