Investors filed a class action lawsuit against cannabis online marketplace WM Technology Inc. (NASDAQ: MAPS) better known as Weedmaps citing the company’s misleading and false statements.

Misleading statements

In September, Green Market Report wrote that Weedmaps agreed to pay the Securities and Exchange Commission (SEC) $1.5 million to settle claims about misleading investors on the company’s metrics. The SEC charged that Weemaps executives padded the user stats to bolster the company’s apparent performance to investors.

“WM Technology misleadingly reported substantial and continued MAU growth and emphasized the strength and growth of its user base in its public filings and earnings calls,” the SEC charged. “These purportedly ‘active’ users did not volitionally seek out the WM Technology site, and, in most instances, they took no action whatsoever on the site.  Despite the reported growth in MAU, WM Technology’s user engagement metrics were stagnant or declining.”

The SEC said that the company’s former CEO Chris Beals and former CFO Arden Lee both misled securities regulators and investors on the strength of its MAU numbers and the fact that the supposedly growing metric included supposed site visitors who were redirected to Weedmaps.com from pop-up ads on other websites, the SEC said. The day after the SEC announced that the company settled, it announced that Beals and Lee each agreed to pay a fine of $175,000.

Class action case

The complaint essentially repeated the same timeline that the SEC outlined when it announced its allegations. The investors are adding other executives to the lawsuit beyond Beals and Lee. In addition to those executives, the investors have included executives from the Special Purpose Acquisition Corporation Silver Spike that brought Weedmaps public:

• Douglas Francis, Executive Chair
• Susan Echard, Interim Chief Financial Officer
• Mary Hoitt, interim chief financial officer of WM Technology from July 2023 until approximately February 2024.
• Scott Gordon,  Chief Executive Officer of Silver Spike from its inception until the merger with Legacy WM.
• William Healy, President of Silver Spike from its inception until the merger with Legacy WM.
• Gregory M. Gentile  Chief Financial Officer of Silver Spike from its inception until the merger with Legacy WM.

NASDAQ adds to problems

As Weedmaps continues to deal with the fallout from the misdeeds of the previous management team, on October 11, NASDAQ told the company its share price no longer met the minimum threshold of a dollar to remain listed. As per protocol, Weedmaps has 180 days to get its share price back over a dollar. If it can’t accomplish this, the NASDAQ will give them another 180 days. The company warned investors that it might not be successful in getting the stock price higher within 180 days.

Weedmaps stock closed at 89 cents on Friday, down from its 52-week high of $1.47.

According to Simply Wall Street, “A total of 25 investors have a majority stake in the company with 44% ownership.” The article also stated that individual investors own 52% of the company. It also stated, “Morgan Stanley, Investment Banking and Brokerage Investments is currently the largest shareholder, with 6.2% of shares outstanding. Douglas Francis is the second largest shareholder owning 4.9% of common stock, and The Vanguard Group, Inc. holds about 4.6% of the company stock.”

1891000-1891452-https-ecf-cacd-uscourts-gov-doc1-031143473413 (1)