Weedmaps Co-Founders Propose Buyout Amid Cannabis Industry Challenges
Doug Francis and Justin Hartfield, co-founders of Weedmaps, have proposed a $100 million buyout to take the cannabis store-finder service private.
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The move reflects significant headwinds in the cannabis industry, despite a year of improved stock performance for WM Technology Inc.
Key Details of the Offer:
Offer Price: $1.70 per share, representing a premium over the $1.39 closing price on Wednesday.
Stock Movement: Following the announcement, Weedmaps’ stock rose 13.9% and saw an additional 5% gain in premarket trading Thursday.
Ownership Impact: The co-founders seek to buy the approximately 68% of the company they don’t already own.
Industry and Business Challenges:
Weedmaps went public in 2021 via a SPAC merger at its peak valuation of nearly $28 per share. However, the company has struggled in the years since:
Declining Markets: Licensed cannabis markets have shrunk from their 2021 highs.
Competition: Multi-state cannabis operators consolidating retailers and technology giants like Google Maps now offering dispensary-finding tools have eroded Weedmaps’ niche advantage.
Market Volatility: Weedmaps’ stock has fluctuated between $0.70 and $1.56 per share in 2024, a sharp decline from its initial public offering (IPO) peak.
The Case for Going Private:
In a letter to shareholders, Francis and Hartfield emphasized the benefits of privatization:
Immediate Liquidity: Current stockholders would have a clear exit strategy.
Operational Flexibility: The company could navigate industry challenges without the pressures of public markets.
Historical and Current Valuation:
Weedmaps debuted at a market cap nearing $1.5 billion but has since fallen to around $187 million as of 2024.
Broader Context:
The cannabis sector continues to face hurdles, including high taxation, regulatory complexities, and competition from illicit markets. For Weedmaps, staying competitive requires addressing these structural industry issues while fending off tech-sector encroachment.
The buyout proposal underscores the turbulence in the cannabis space and the strategic pivot required for Weedmaps to regain its footing in a challenging environment.
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