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Weedmaps Parent Goes Public at $2.6B Valuation

Chris Beals, chief executive of the parent company of Weedmaps, an Irvine-based provider of cannabis information, believes his software company’s recent public listing via reverse merger is a “watershed moment” for the cannabis industry.

“It’s a significant moment of pride,” Beals told the Business Journal last week.

“Our public listing is more than just a milestone for our company. It’s demonstrative of the meaningful work we’re doing to power a more inclusive global cannabis economy.”

The company, registered as WM Technology Inc.  (Nasdaq: MAPS), raised $579 million in proceeds from the reverse merger and is now valued at $2.6 billion.

The money will be put to good use, Beals said.

“We are definitely looking at ways to more aggressively deploy capital given the acceleration we are seeing in legalization and the issuance of new licenses,” Beals said.

Weedmaps, which calls itself “the most widely used medical and recreational marijuana dispensary locator in the industry,” lists more than 4,000 brands on its online cannabis directory.

$2.6B Valuation 

The stock of the blank-check company that WM Technology (previously WM Holding Co.) merged with, Silver Spike Acquisition Corp. (Nasdaq: SSPK), had a set price of $10 per share when it went public.

The New York-based Special Purpose Acquisition Co., or SPAC, announced a deal with the Irvine company last December.

Shares have since doubled from its set price of $10 to $21.35 a share on June 17, the day after it went public. Since then, its shares settled around $18.

It’s by far the largest cannabis-related business in Orange County, and now among the most valuable public companies in the cannabis industry, though Weedmaps execs stress it is merely a technology company serving the nascent industry, and its operations do not come in contact with cannabis.

KushCo Holdings Inc., a Cypress-based supplier of cannabis paraphernalia, had a $159 million market cap when it was acquired earlier this year. Terra Tech Corp., a Santa Ana-based agricultural company focused on cannabis, was valued around $64 million when it completed its sale to Unrivaled this month.  

SPACs have become an increasingly popular method for private companies to go public without the regulatory scrutiny or lengthy process common with traditional IPOs. Other local firms using the process of late include auto-focused technology company Indie Semiconductor in Aliso Viejo (Nasdaq: INDI) and Advantage Solutions Inc. (Nasdaq: ADV) of Irvine.

Weedmaps, in part, chose to take the SPAC route to the public market because it provided “a more controlled entry” and “more time to tell our story to investors, which we felt was important given the complex and often misunderstood nature of our industry,” Beals said.

He said barriers to entry include a “the complex regulatory regime governing cannabis” in addition to the number of compounds and form factors of cannabis products.  

Profitable From Beginning

Justin Hartfield and Doug 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 Google and Apple stores. The New York Daily News in 2009 called it “a new stoner’s paradise on the web.”

It became known as a “Yelp” of the marijuana industry by permitting its 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.

Weedmaps says it’s been profitable for its entire 13-year history and its revenue grew at a 35% annual rate from 2014 to 2020 during which its gross margin expanded from 92% to 95%.

In 2020, the company generated $162 million of revenue, adjusted EBITDA of $43 million and net income of $39 million.

Cannabis Advocate

Beals, who has a law degree from the University of Pennsylvania, previously provided legal and financial advice in the private equity world in New York City, where he lived until 2015. At that time he joined Weedmaps as general counsel, and he became the CEO in 2019.

Beals described his six-year journey with Weedmaps as “incredibly rewarding.”

Since joining, the 41-year-old has “spent a ton of time on the road both advocating for cannabis legalization and also visiting the stores and facilities of brands and retailers.”

“I think the most important driver of my growth and Weedmaps being able to scale is a focus on understanding the needs of cannabis businesses and consumers.”

While cannabis is still an illegal drug under federal law, the industry is becoming more accepted.

He pointed to the 19 states and D.C. that have legalized cannabis, the 36 states instituting their own medical programs and “a more accommodating legislative climate in Washington.” Notably, all five states’ ballot initiatives for medical or adult use legalization in the November 2020 election passed.

Retail sales of cannabis grew to $12.4 billion in 2019, up from $3.3 billion in 2014, and are expected to grow at a compounded annual growth rate of 18% through 2025, reaching nearly $34 billion sales, Weedmaps’s registration statement said, citing a report by Arcview Market Research/BDS Analytics.

“The cannabis market is no longer emerging,” Beals said.

Cannabis has “cemented its status as an important and growing sector as well as an investable vehicle of economic opportunity for years to come and with that comes a lot of opportunity for us.”

Team Mentality   

About $455 million in proceeds from the reverse merger went to existing Weedmaps equity holders. Its executive officers have rolled 100% of their equity holdings as part of the transaction, the registration statement indicated.

Beals owns 6.2 million Class V common stock, or about 5.9% of those shares, which the registration said are like the Class A shares trading on the Nasdaq.

Weedmaps is putting $125 million on its balance sheet to fund the company’s growth.

It aims to further scale its subscriptions that provides software-as-a-service to vendors with point-of-sales and logistics, with an emphasis on regulatory compliance. It also intends to expand internationally.

A key area of focus is supporting cannabis brands.

“Not only is this an area that is primed to experience significant licensing growth, but historically there have been significant pain points for brands. However, these are challenges that our company is uniquely positioned to solve,” Beals said.

“We are putting a strong emphasis on building a customer-first mindset where we aren’t simply selling products and services to cannabis licensees, but we are also a consultative partner to these operators as they look for ways to grow or expand their businesses.”

The company is combining its marketing, sales and customer success teams under Chief Marketing Officer Juanjo Feijo, who recently added the chief operating officer role to his title.

Feijo previously oversaw customer engagement at Adobe and served as a vice president of marketing at Instacart, where his duties spanned both sales and marketing.

The 430-person company listed over 50 open positions on its website at press time, and recently instituted a work-from-anywhere policy to give its employees the flexibility to work remotely, five days a week or anything in between, though it said it is committed to maintaining its Irvine headquarters. 

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