How Does Weedmaps Make Money? Company’s $1.5 Billion Merger, Explained

In a December 2020 press release, Weedmaps operator WM Holding Company announced that it had grown revenue at a CAGR of 40 percent over the past five years and that the company was on track to deliver $160 million in revenue and $35 million in EBITDA for 2020. So, how does Weedmaps make money?

Well, Weedmaps — dubbed the “Yelp for pot” — makes money through its dispensary business listings and its software and data solutions. Weedmaps just merged with an acquisition company to go public.  

At the time of a 2010 Fast Company profile, Weedmaps was making more than $400,000 each month in revenue, according to the magazine. Earlier that year, Weedmaps started charging dispensaries for listings — at prices ranging from $295 per month to $1,000 per month. A 2018 Guardian article reported that some dispensaries were paying more than $10,000 per month at the time.

Now, Weedmaps is the consumer-facing platform of WM Holding Company, which is a company that also “provides the broadest suite of cloud-based software as a service (SaaS) and data solutions for the cannabis industry,” including “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,” according to the WMH website.

In December 2020, WM Holding Company announced a merger with Silver Spike Acquisition Corp. (Nasdaq: SSPK), which resulted in WMH becoming a public company. As Reuters reports, Silver Spike is a SPAC (special purpose acquisition company). A SPAC is a company that raises funds in an IPO with the intent to acquire a private company. The private company becomes public as a result of the merger. A SPAC is an alternative to the conventional IPO process.

Silver Spike raised $250 million in its August 2019 IPO on Nasdaq with a focus on buying a marijuana company. “There was no better opportunity and no more dynamic company and story for us to consider a transaction with than with WMH,” Silver Spike CEO Scott Gordon said at the time, according to Reuters.

Now that WMH has merged with Silver Spike, the combined company is trading on Nasdaq. According to InvestorPlace, SSPK stock spiked — pardon the pun — by as much as 23 percent in pre-market trading amid the news of the trading. 

InvestorPlace noted that the stock could be a good fit for cautious investors who don’t necessarily want to invest in marijuana companies that actually handle the plant. InvestorsPlace said, “The data indicates that WM Holding Company is thriving amid the emerging U.S. marijuana market. And so, as an investor, you can take an indirect route to the cannabis universe with SSPK stock.”

According to Reuters, the merger deal values the company at around $1.5 billion. Weedmaps was expected to receive gross proceeds of up to $575 million from the merger, including $325 million in a PIPE (private investment in public equity) transaction.