I see a hot new cannabis stock that everyone needs to know about.
Weedmaps is one of the most popular websites in the pot industry.
Founded in 2008 and headquartered in Irvine, California, the Weedmaps website connects cannabis retailers with cannabis consumers. The company also offers a suite of online tools to help cannabis companies manage operations.
A big merger puts Weedmap’s growth potential into play for U.S. investors.
Here is how Weedmaps describes its business.
Our signature consumer-facing platform (available on the web at www.weedmaps.com, as well as through native Android and iOS apps), provides consumers with information regarding cannabis products, including online ordering, local retailer and brand listings, product discovery, and consumer education on cannabis and its history, uses, and legal status.
In addition, WMH provides the broadest suite of cloud-based software as a service (SaaS) and data solutions for the cannabis industry. WMH’s product suite includes point of sale, logistics, wholesale, and ordering solutions that enable clients to scale their businesses while complying with the complex and disparate regulations applicable to the cannabis industry.*
Weedmaps has been on a roll the last few years. Its website ranks as #734 in popularity in the U.S. and has been averaging about 15 million visits per month for the last six months.
The company said its revenue has grown at a compound annual rate of 40% in the last five years and is on track to hit $160 million in revenue and $35 million in EBITDA this year.
Now, after a $1.5 billion cannabis merger, investors can own a piece of Weedmaps. Here are some more details from Reuters.
The deal to take Weedmaps public, which values the company at around $1.5 billion, is a rare example of a business focused on the cannabis sector listing on a U.S. stock exchange. Companies are unable to list shares in the United States if their business involves selling marijuana or is “plant touching,” which Weedmaps is not. Weedmaps expects to receive gross proceeds of up to $575 million from the deal, in part from proceeds Silver Spike had raised and also through $325 million in a private investment in public equity, or PIPE, transaction.
4 Reasons Weedmaps is an Exciting Merger
There are four reasons that this looks like an attractive merger and why we will be following Weedmaps closely.
#1 – Broad Exposure to U.S. Cannabis Industry
The U.S. cannabis industry is experiencing explosive growth right now as more states continue to legalize. Weedmaps offers broad exposure to this powerful trend.
#2 – Weedmaps Business Model Is Highly Scalable
As a digital business, the Weedmaps business is highly scalable. This means that Weedmaps doesn’t incur significant expenses when adding more users to its platform or more visitors to its website. This is one of the biggest reasons why Weedmaps has been profitable for the last ten years.
#3 – Impressive Financial Profile
Weedmaps recently said it has grown revenue at a compound annual rate of 40% for the last five years. That is impressive on its own. However, I suspect revenue will grow even faster in the next few years as more states legalize and millions of new consumers join the industry.
#4 – Weedmaps Will Trade on a U.S. Exchange
Shares of Silver Spike Acquisition Corp (NASDAQ: SSPK), the company that is taking Weedmaps public, trades on the U.S.-based NASDAQ. This is important. Most of the best U.S. cannabis stocks were forced to list shares on Canadian exchanges because U.S. laws forbid these companies from list on U.S. exchanges. That is a problem for U.S. investors because most brokers do not allow access to international stocks. With Weedmaps listing on the NYSE, this means tens of millions of U.S. investors will have access to shares.
Shares of Silver Spike Jumped on the News
After news of the deal hit the Street, shares of Silver Spike surged higher on the news. In the last few days, shares have pulled back. Nonetheless, investors are enthusiastic about this news, and you can see that in the big spike higher. Moving forward, I expect shares to stabilize and begin trending higher again.
The Big Picture on the Weedmaps Merger
Weedmaps is a clear industry leader that offers direct exposure to the high-growth U.S. cannabis industry.
The company has been delivering impressive revenue growth and has been profitable for the last ten years. This is a cannabis stock to keep an eye on. I see major future potential.
About the Author & Cannabis Stock Trades
Michael Vodicka is an equity analyst with more than 20 years of experience trading and investing. His research has been featured in some of the industry’s most respected publications. He has been investing and leading investors in the cannabis sector since 2013.