MedMed Bought Heavily After Management Tackles Thorny Compensation Issue

Benjamin A. Smith

It’s a rare occurrence that news released late Friday produces positive results, but MedMen Enterprises Inc (CNSX:MMEN) is the exception. Most times, those pressers are either non-material or news the issuing company wants to bury while traders focus on the upcoming weekend. Today however, it was the right catalyst to get investors interested in MedMen’s languishing shares—finally.

On June 8 at 5:02 pm EDT, MedMen announced that Co-founder and CEO Adam Bierman and Co-founder and President Andrew Modlin will receive their long-term incentive plan (LTIP) units according to a more shareholder-friendly schedule. One third of the total units will vest when MedMen’s Subordinated Voting Shares reaches reach $10/share CDN; another third will vest when the share price reaches $15/share and the final third when the share price reaches $20/share. Previously, the terms were much more executive-friendly, and were roundly criticized by the investment community.

Without getting into all the entirety of specifics regarding MedMen’s compensation and incentive structure, let’s just summarize by saying it is rather aggressive. It includes such perks as a US$1.5 million per year in salary for four years to the CEO and Chairman, despite the company only having $3 million in revenue. That comes with US$10 million in ‘redeemable units’ based on share price, that have vested, plus another $30 million in long term incentive plan units that vest over 24 months—at the end of every month.

And in the event Medmen’s enterprise exceeds US$2 billion at any time, Mr. Bierman will be granted a US$4,000,000 cash bonus.

Needless to say, these terms are a slew of others have not sat well with investors. It’s the main reason why the stock has been under pressure relentlessly since IPO’ing on May 29. Shareholders simply weren’t biting on compensation packages which seemingly siphoned off a large percentage of the public listing capital raise directly into the pockets of upper management, who own super majority voting stock.

Hence, the granting of shareholder concessions was just the tonic MedMen needed. While it doesn’t fix all the aggressive compensation components favorable to management, it sets rising benchmarks MedMen needs to attain before they can fully profit. It’s a big step in the right direction, as it better aligns shareholder interests with that of its Board.

With the reaction seen today, it appears investment interest in MedMen was never an issue; shareholders simply needed to see more consideration of their own needs before diving in. It’s unfortunate it took an IPO disaster for management to change its tune, but better late then never.

Currently, MedMen is trading higher by $0.79 to $4.64/share (↑20.52). At 2.03 million shares, volume has already eclipsed anything the stock has seen so far. The price has a real shot to close above it’s opening close price ($4.95), which would be a bullish sign.

Benjamin A. Smith

Benjamin A. Smith

Ben is a research analyst and capital markets professional with nearly 20 years of experience. His areas of expertise are broad-based, and include extensive knowledge of macro economics, stock/derivative trading, commodity complexes, cryptocurrencies and technical/quant analysis. He also maintains an particular affinity for U.S. politics and the macro-regulatory environment facing...
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