Investors who bought MedMen Enterprises (NASDAQOTH:MMNFF) in recent months have been scratching their heads lately. Since legalized recreational marijuana sales began in Canada, the stock has fallen around 48% despite midterm election results in the U.S. that will expand state-legalized sales in MedMen’s arena of operations.
The U.S. market for recreational and medical marijuana is expected to reach $11 billion in 2018, then more than double by 2022. With numbers like these, some MedMen investors are wondering — and hoping for a rebound. Here’s why its stock has been hammered lately, and what investors need to see before it can recover.
An expensive lesson
On the Friday following the midterm elections, MedMen announced a deal that the company probably should have completed the week prior. It had originally intended to raise $120 million in Canadian currency ($90.6 million) by selling 17,648,000 units at a price of CA$6.80 each on Nov. 30. These units included a share now, plus rights to purchase another half-share of MedMen for CA$5 at any time up to 36 months after the offering.
Several states voted to expand legal marijuana sales on Nov. 6, and as is usually the case when good news plays out as expected, MedMen stock tanked. The same group of investors is still interested, but their terms have soured. Under a revised agreement, the syndicate will purchase 13,630,000 units for just CA$5.50 each, and now the units include rights to purchase an entire MedMen share for just CA$6.87 before Sept. 27, 2021.
Instead of raising CA$120 million in gross proceeds, MedMen now expects just…
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