The lawsuit follows agreements by the company and former executives to pay fines regarding misleading statements.
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Investors have filed a class action lawsuit against WM Technology Inc. (NASDAQ: MAPS), better known as Weedmaps, accusing the company of making false and misleading statements to investors.
Misleading Statements
Back in September, Green Market Report revealed that Weedmaps had agreed to pay the Securities and Exchange Commission (SEC) $1.5 million to settle claims that it misled investors about its performance. According to the SEC, Weedmaps executives inflated user statistics to make the company appear more successful.
The SEC stated, "WM Technology misleadingly reported substantial and continued MAU (monthly active users) growth and emphasized the strength and growth of its user base in its public filings and earnings calls." But it turned out that these so-called "active" users hadn’t actually engaged with the site; many were simply redirected to Weedmaps from pop-up ads on other websites. While the company claimed it was growing, user engagement was either stagnant or even declining.
The SEC also charged that former CEO Chris Beals and former CFO Arden Lee had misled regulators and investors about the true state of these metrics. After the company settled the charges, both Beals and Lee agreed to pay fines of $175,000 each.
The Class Action Lawsuit
The investors' lawsuit follows the same timeline laid out by the SEC, but they’re going after more than just Beals and Lee. They’re also targeting other executives, including those involved with Silver Spike, the Special Purpose Acquisition Corporation (SPAC) that took Weedmaps public. The lawsuit includes:
Douglas Francis, Executive Chair
Susan Echard, Interim CFO
Mary Hoitt, former interim CFO from July 2023 to February 2024
Scott Gordon, former CEO of Silver Spike
William Healy, former President of Silver Spike
Gregory M. Gentile, former CFO of Silver Spike
NASDAQ Adds to the Challenges
As if the lawsuit wasn’t enough, Weedmaps is also facing trouble with NASDAQ. On October 11, NASDAQ informed the company that its share price had dropped below the $1 minimum required to remain listed. Weedmaps now has 180 days to bring its stock back above $1 or risk being delisted. If the company can’t meet this requirement, they’ll get another 180 days, but Weedmaps has already warned investors that they may not succeed in raising the stock price.
As of last Friday, Weedmaps stock closed at 89 cents, down from its 52-week high of $1.47.
According to Simply Wall Street, 25 major investors control 44% of the company. Individual investors hold 52% of the stock, with Morgan Stanley being the largest shareholder at 6.2%. Douglas Francis, the company’s Executive Chair, owns 4.9%, while The Vanguard Group holds 4.6%.
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