Analyst Says MedMen's Momentum Changing, Tilray's Stake Won't Double Its Value But Will Hold Premium

MedMen Enterprises Inc. MMNFF revealed Tuesday that it has secured $100 million in financing via a private sale of its units in a deal led by Serruya Private Equity.

At the same time, the company disclosed that Tilray, Inc. TLRY acquired the majority of MedMen’s outstanding senior secured convertible notes that were originally held by certain funds affiliated with Gotham Green Partners LLC (GGP) and others.

The Analyst

Cantor Fitzgerald analyst Pablo Zuanic upgraded his rating on MedMen’s stock from Underweight to Neutral and established a price target of $0.30.

The Thesis

Tilray is investing around $118 million in MedMen in order to acquire some 21% contingent stake, based on which it seems that 100% MedMen equity has a value of $561 million, compared to its current market cap of $220 million, explained the analyst.

Zuanic further noted that this deal will not likely double MedMen's valuation because, as seen with other companies such as Acreage Holdings ACRDF, “stocks with equity investments/valuations contingent on the federal permissibility of cannabis tend to trade at steep discounts to their contingent offer prices.”

Nevertheless, with momentum changing for the company because of recent milestones, Cantor decided to rate the stock Neutral.

“On fully diluted pro-forma numbers, we calculate MedMen trades at 3.4x FactSet consensus CY22E sales compared with 3.1x for the US MSO average,” Zuanic said.

In conclusion, the analyst stressed that MedMen's premium should “stick” thanks to the new deal with Tilray.

The Price Action

MedMen’s shares were trading 1.49% higher at $0.267 per share at the time of writing Wednesday morning.

Photo: Courtesy of davide ragusa on Unsplash