## Weedmaps Under Fire: Class Action Lawsuit and Plunging Stock Price
The cannabis industry darling, Weedmaps, is facing a storm of legal and financial troubles. A new class action lawsuit accuses the company of misleading investors about its performance metrics, adding to the woes stemming from a recent SEC settlement. This follows a period of decline in Weedmaps’ stock price, raising concerns about its future on NASDAQ.
The lawsuit, filed by a group of investors, echoes the findings of the Securities and Exchange Commission (SEC) investigation. In September, the SEC charged Weedmaps with inflating its monthly active user (MAU) numbers, painting a misleading picture of growth in public filings and earnings calls. The SEC determined that the “active” users included website visitors redirected from pop-up ads, many of whom never actually interacted with the platform.
The SEC settlement saw Weedmaps pay $1.5 million in fines, with former CEO Chris Beals and former CFO Arden Lee also facing individual penalties of $175,000 each. The class action lawsuit, however, expands the allegations, naming several other key figures, including executives from Silver Spike, the Special Purpose Acquisition Corporation (SPAC) that took Weedmaps public.
Adding to the company’s woes, NASDAQ recently issued a warning to Weedmaps, citing its stock price falling below the minimum requirement of $1.00 per share to remain listed on the exchange. The company has a 180-day window to raise its stock price above the threshold, with the possibility of an additional 180-day extension. However, Weedmaps has cautioned investors that it may not be able to achieve this goal.
At the time of writing, Weedmaps’ shares are trading at 87 cents per share, down 1.97%. This decline reflects investor concerns surrounding the company’s legal battles and its precarious position on NASDAQ.
The shareholder structure reveals that 25 major investors hold a combined 44% of Weedmaps, while individual investors own the remaining 52%. Key shareholders include Morgan Stanley (6.2%), executive chair Douglas Francis (4.9%), and The Vanguard Group (4.6%).
The future of Weedmaps remains uncertain as it navigates these legal and financial challenges. The class action lawsuit, coupled with the looming threat of delisting, could significantly impact the company’s future trajectory and its ability to compete in the burgeoning cannabis industry.