WM Technology Inc., the Irvine-based software company that helps marijuana users and retailers navigate the cannabis world under the much trendier name Weedmaps, may be heading back into private hands.
One reason: the company faces “significant headwinds” on the public markets.
Marijuana use, both recreational and medicinal, has been gaining in popularity though hurdles remain, including restrictions on banking the profits as well as federal and state laws on its use.
Doug Francis and Justin Hartfield, the company’s founders, said last month they were offering $1.70 per share to buy the company, a 39% premium to the closing price as of Dec. 17. The shares jumped 23% to $1.51 each and a $252 million market cap following the offer.
Public Listing 2021, Private Offer 2024
The company went public in 2021 via a reverse merger with a special purpose acquisition company, commonly known as a SPAC. The company, registered as WM Technology Inc. (Nasdaq: MAPS), raised $579 million in proceeds from the reverse merger in July 2021 and was valued at as much as $2.6 billion.
The co-founders figured that market conditions in 2020-2021 would let the company “capitalize on growth opportunities in an accelerated manner and create sustainable long-term stockholder value.”
“Today, however, WM is facing significant headwinds, with licensed end-markets continuing to decline from the peak volumes achieved at the time of the company’s SPAC transaction in 2021,” the co-founders said.
They added that “continued consolidation of cannabis retailers and brands among large multi-state operators” is creating “significant risks.”
The co-founders also said some clients have been removed from the platform due to late payments while the industry faces challenges including price deflation.
Net income increased to $5.3 million in the third quarter after a net loss of $2.5 million in the same period a year ago. Net revenue for the period was $46.6 million, virtually unchanged from the same quarter a year earlier.
Large Market, Especially California
The market size is large, especially the home market.
“At $5.1 billion dollars in total cannabis sales in 2023, California is still considered the world’s largest and most lucrative cannabis market with the same revenue streams as a small nation’s GDP,” according to Los Angles-based cannabis consultancy Global GO LLC.
“However, that has belied some of the challenges that cannabis businesses in the state have been facing, including a high local and state excise tax structure that impacts profitability and a powerful illegal market,” Global GO said.
Nationwide, the National Conference of State Legislatures said in June that 24 states, two territories and the District of Columbia had legalized small amounts of cannabis – marijuana – for adult recreational use. As of this year, Nebraska joined 38 other states that have legal medical marijuana programs, the New York Times reported on Dec. 31.
The WM Technology board has formed a special committee to consider the proposal and caution there is “no assurance that any definitive agreement will be executed.”
Still co-founders Hartfield and Francis said they expect to be able to reach a definitive agreement in three to four weeks.
Online Platform for Consumers, Businesses
Their online platform provides consumers with information regarding cannabis products, including online ordering, local retailer and brand listings, product discovery and consumer education on cannabis and its history, uses and legal status.
The company ranks No. 12 in a tie on this year’s list of largest software companies based in Orange County with 440 full-time employees companywide as of a year ago.
Weedmaps, which calls itself “the most widely used medical and recreational marijuana dispensary locator in the industry,” boasts of an average of 5,100 paying clients listed on its platform.
Medicinal Users, Dispensaries
Hartfield and Francis began Weedmaps in 2008 to help medicinal users find dispensaries and post reviews of products and stores. It quickly gained popularity, becoming one of the most downloaded apps in GooglePlay and Apple stores.
It became known as a “Yelp” of the marijuana industry as the platform allowed users to review the pot they bought and rank the businesses from one to five stars. Pot shops can use Weedmaps to provide menus of their products, complete with daily discounts.
The company appears to be growing. It had 22 jobs posted as of Dec. 26, including paid search manager, senior software engineer and account manager.
“Over the past 15 years, the Weedmaps marketplace has become a premier destination for cannabis consumers to discover and browse cannabis-related products, access daily dispensary deals, order ahead for pick-up and delivery by participating retailers (where applicable) and learn about the plant. The company also offers eCommerce-enablement tools designed to help cannabis retailers and brands reach consumers, create business efficiency and manage industry-specific compliance needs,” the company says.
The company says it’s committed to advocating for full U.S. legalization.
Cannabis Legal in California
California’s Department of Cannabis (Marijuana) Control spells out the legal scene as follows:
California became the first state to allow medicinal cannabis use when voters passed the Compassionate Use Act in 1996. Today, cannabis is legal in California for both medicinal and adult (recreational) use.
The cannabis industry claims it is strictly regulated to make sure:
• Businesses operate safely
• Products are contaminant-free and labeled to inform purchasers
• Cannabis is kept away from children
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