Investors filed a class action lawsuit against WM Technology Inc. MAPS, commonly known as Weedmaps, accusing the company of issuing misleading and false statements regarding its performance metrics. According to a report by Debra Borchardt on Green Market Report, the lawsuit follows prior agreements by Weedmaps and former executives to pay fines after settling claims brought by the Securities and Exchange Commission (SEC).

Misleading Investor Metrics

In September, GMR revealed that Weedmaps had agreed to pay $1.5 million to the SEC for allegedly misleading investors about the company's user metrics. The SEC charged that Weedmaps inflated its monthly active user (MAU) numbers, misleadingly portraying continued growth in public filings and earnings calls. According to the SEC, these “active” users included website visitors redirected from pop-up ads, most of whom took no action on the platform, despite reports of MAU growth.

"Weedmaps misleadingly reported substantial and continued MAU growth and emphasized the strength of its user base in its public filings and earnings calls," the SEC stated. Both the company's former CEO, Chris Beals, and former CFO, Arden Lee were charged with misleading regulators and investors. Following the settlement, Beals and Lee each agreed to pay fines of $175,000.

Class Action Lawsuit Expands Allegations

The class action lawsuit mirrors much of the timeline outlined by the SEC but expands its scope to include additional executives beyond Beals and Lee. Investors have named several other key figures, including executives from Silver Spike, the Special Purpose Acquisition Corporation that took Weedmaps public.

Among those named in the lawsuit are Douglas Francis, executive chair; Susan Echard, interim CFO; Mary Hoitt, former Interim CFO of WM Technology; Scott Gordon, CEO of Silver Spike during its merger with Legacy WM; William Healy, president of Silver Spike during the merger and Gregory M. Gentile, CFO of Silver Spike during the merger.

NASDAQ Warning And Stock Performance

Adding to Weedmaps' troubles, NASDAQ informed the company on October 11 that its stock price had fallen below the minimum requirement of $1.00 per share to remain listed on the exchange. Weedmaps now has 180 days to boost its share price above the threshold, with the possibility of an additional 180-day extension if necessary. However, the company warned investors that it might not succeed in raising the stock price within the given timeframe.

Weedmaps’ shares are trading %1.97 lower at 87 cents per share at the time of this publication.

Shareholder Structure

According to Simply Wall Street, 25 major investors collectively own 44% of Weedmaps, while individual investors hold 52%. Among the largest shareholders are Morgan Stanley, which owns 6.2% of the company, executive chair Douglas Francis with 4.9%, and The Vanguard Group with 4.6%.

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