John SchroyerCalifornia-based WM Technology Inc. (Nasdaq: MAPS), the parent company of the popular dispensary finder website Weedmaps, is the latest in a string of financially troubled cannabis companies to go dark regarding the formerly regular quarterly earnings calls with company executives, another possible red flag for the marijuana tech firm.
The company reported its full 2023 earnings this week – a loss of $15.7 million, quite the improvement from the $82.7 million loss sustained in 2022 – but hasn’t held an earnings call with company leadership since the end of the third quarter last year. The required financial filing with the U.S. Securities and Exchange Commission was also late, which led to the publicly traded company running afoul of Nasdaq rules.
California-based StateHouse Holdings – another financially troubled marijuana company – also hasn’t held a quarterly earnings call since 2022. And before it went bankrupt in April, MedMen Enterprises Inc. stopped hosting earnings calls; its last such call was in November 2021.
While a lack of earnings calls by itself doesn’t necessarily mean trouble in paradise for the once-high-flying cannabis advertising giant Weedmaps, it’s the latest in a series of indicators that the company may be in trouble. From the macro perspective, Weedmaps’ market cap took one hell of a tumble, falling to a $157 million market cap as of May 28, down from the company’s touted valuation of $1.5 billion when it went public in 2021.
Another ongoing issue is a formal investigation by the SEC into Weedmaps’ now-defunct use of its monthly active users (MAU) as a performance metric for investors, the company noted in its most recent filings. Although the MAU model was discontinued after being found to be problematic, the issue has been dogging Weedmaps for two years – since the company board launched an internal investigation, which then led to a formal inquiry by the SEC starting in August 2022.
Last summer, “several” current and former Weedmaps employees testified to the SEC regarding the matter after subpoenas were issued, and the company warned in its filings that the investigation could still “result in penalties or other sanctions against us, as well as negative publicity and reputational harm.”
The investigation is also costing the company hundreds of thousands of dollars, at the minimum, it disclosed, citing a $400,000 payment to Silver Spike Holdings, “an affiliate to a member of the board of directors in connection with responding to a subpoena received from the SEC’s Division of Enforcement in connection the SEC investigation.”
That doesn’t include potentially enormous attorneys’ fees in such a situation as well, Weedmaps noted, even if the company is ultimately exonerated.
Amid all of this, Weedmaps still hasn’t replaced CEO Chris Beals, who stepped down in November 2022, just three months after the SEC investigation began but well into a financial downturn for the tech company. Rather, Weedmaps continues to be helmed by Executive Chairman Doug Francis, who has helped the company get much of its financial house in order.
Perhaps more worrisome for the tech company is the broader trend of cannabis retailers – and to a lesser degree, brands – reaching marijuana consumers directly through more mainstream online sources such as Google, Yelp, and other map services, many of which have been increasingly listing state-licensed dispensaries.
Weedmaps appears to be in need of a reinvention or a reorientation or a revolution to get back on track toward sustainable profitability, but whether that’ll happen seems to be anybody’s guess.
