SEC alleges data inflation, fines parent of cannabis ad platform Weedmaps $1.5M

(This story has been updated with the appointment of a new board member.)

The U.S. Securities and Exchange Commission has fined the parent company of cannabis advertising platform Weedmaps $1.5 million for allegedly misstating user metrics leading up to its 2021 sale and ensuing listing on the Nasdaq.

In a Sept. 24 consent order, the SEC accused Irvine, California-headquartered WM Technology of repeatedly citing “untrue and misleading” data on “monthly active users” (MAUs) in regulatory filings, earnings reports, marketing materials and investor decks for more than a year.

That time frame included:

• WM Holding Co.’s December 2020 announcement that it planned to merge with Silver Spike Acquisition Corp. Silver Spike is a special purpose acquisition company (SPAC), also known as a blank-check acquisition firm.
• The company’s subsequent debut on the Nasdaq in June 2021 under the ticker symbol MAPS.

The transaction for the sometimes-controversial retailer advertising and cannabis product review website generated $579 million in gross proceeds for Weedmaps.

SEC: Company ‘misleadingly reported’ growth

“Both during the de-SPAC transaction and after WM Technology became public, 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’s consent order noted.

Weedmaps did not immediately respond to MJBizDaily requests for comment.

According to the SEC investigation, WM Technology described “monthly active users” as unique users of the Weedmaps app or website visitors tallied during a calendar month.

However, the SEC charged that a “large and increasing” number of users instead visited a third-party site that included a Weedmaps pop-up add and did not engage with its website or app.

The federal agency further alleged these nonengaged users comprised an increasingly large percentage of WM Technology’s total monthly active users.

Former execs Beals, Lee agree to penalties

In a separate action, Chris Beals, WM Technology’s former CEO, and Arden Lee, the company’s ex-chief financial officer, agreed to pay $175,000 apiece in civil penalties.

The SEC alleges that, from May 2021 to May 2022, Beals and Lee knew monthly users were declining but continued issuing misleading figures in public filings and earnings calls related to continued user growth and failed to stop the practice.

Under the agreement, Beals and Arden were not required to admit any wrongdoing, though they are barred from serving as an executive at any public company for three years, according to an SEC news release.

Beals did not immediately respond to an MJBizDaily request for comment.

He “decided to step down” from the company and its board in November 2022.

At the time, WM Technology reported 5,576 average monthly paying clients.

WM Technology fell into disfavor with the Nasdaq earlier this year.

The company acknowledged in April it had received “an expected delinquency notification letter” from the stock exchange after not filing its annual 10-K report on time.

New board member

Meanwhile, Glen Ibbott was appointed to Weedmaps’ board of directors, effective Oct. 1.

Ibbott founded GK Financial Ventures, a financial consulting company based in Vancouver, British Columbia, this past February.

Before that, he served almost seven years as chief financial officer of Aurora Cannabis, a Canadian marijuana operator.