Cannabis retailer MedMen's financial troubles are a warning for the marijuana industry

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Recent financial statements show that MedMen risks running out of money within months unless it raises more money.

Yet, in what could be a warning for the American marijuana industry, it is racing to raise cash to cover its mounting losses.

In fact, legalized dispensaries and regulators have begun to call for greater enforcement against the illegal market in California, raising the potential that legalization may actually lead to a new wave of cannabis-related arrests. Meanwhile, MedMen has had limited success in its efforts to attract new or infrequent users, raising questions about how big that market may be.

To give itself more time, MedMen has sold off some properties, including dispensaries. But that strategy has limits. MedMen has already sold much of its best real estate, and when it sells assets, the company further drives up its costs, because it must now pay rent to the new dispensary owners. MedMen's problems also point to bigger issues in the legal cannabis industry — especially in California and Massachusetts, which have heavily regulated and high-cost markets.

Tom Adams, managing director of industry analytics for BDS Analytics, which covers the cannabis industry, said high taxes and limits on legal dispensaries have damaged the California market. Taxes and regulators mean that legal marijuana can cost nearly double black-market prices, Adams said.

 

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