The offer from WM Technology Inc.’s (Nasdaq: MAPS) founders to take the company private at $1.70-per-share is a reasonable exit strategy for shareholders, according to a new report from Zuanic & Association.
In the report released Wednesday, analyst Pablo Zuanic said the bid from Doug Francis and Justin Hartfield is solid, given challenging industry conditions and the company’s recent struggles. He also noted that the company, which operates online cannabis marketplace Weedmaps, faces execution risks and limited upside potential if it stays as is.
“We believe shareholders should accept the offer,” Zuanic wrote, citing “likely 20% downside if it is not approved” and execution risks as the company aims to make 2025 a growth year under new technical leadership.
The non-binding proposal, announced last month, values Weedmaps at approximately $260 million and represents a 39% premium to the company’s closing price before the offer was made public. Francis and Hartfield, who together own about 32% of outstanding shares, would need to fund approximately $158 million to complete the transaction.
Zuanic’s analysis suggests the offer price of 1.4 times projected 2024 sales is fair, albeit a discount to comparable marketplace companies that trade between 3-4 times forward sales. The analyst noted, however, that Weedmaps has historically traded at such a discount to peers.
The report outlines several potential benefits of private ownership, including reduced public company costs and fewer Nasdaq-related restrictions on cannabis industry activities. As a private entity, Weedmaps could expand into payment services, delivery operations and other areas that might raise concerns while listed on a major exchange, according to Zuanic.
Francis and Hartfield argued in their offer letter that the cannabis market hasn’t lived up to the growth expectations that drove their 2021 public listing via SPAC merger. They cited declining sales volumes in key markets and increased competition from traditional technology providers, such as Google.
Weedmaps recently settled Securities and Exchange Commission allegations regarding misleading user metrics for $1.5 million, Green Market Report previously wrote, and most recently reported that average monthly paying clients fell 10% in the first nine months of 2024 versus the prior year.
While Zuanic acknowledged some market headwinds, he pushed back on the founders’ broader industry critique, noting that U.S. cannabis sales reached $31 billion in 2024, up from $20 billion in 2020. The analyst projects the market will hit $38 billion by 2027.
Additionally, Zuanic estimates Weedmaps could support leverage of up to 2.5 times EBITDA by 2026 after going private, projecting that metric could reach $45 million-$55 million under private ownership. The company currently carries no debt and holds $45 million in cash.
“There is plenty of room for them to lever the company,” the analyst wrote.
One potential hurdle for competing bids: a tax receivable agreement that would trigger a payment “estimated to be over $100 million at the offer price,” according to the founders’ letter. Zuanic cited this obligation as a key reason rival offers are “highly unlikely.”
The special committee reviewing the proposal retained Evercore as financial advisor and Allen & Overy Shearman Sterling as legal counsel. The group aims to complete its process within 3-4 weeks of the initial offer date.
Zuanic suggested shareholders could potentially seek a modest price bump of around 10 cents per share but advised against holding out for significantly more.
“Read the room,” he wrote, citing current cannabis market conditions.
[[{“value”:”The cannabis equity analyst recommended that MAPS shareholders accept the bid rather than hold out for a higher price.
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