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SSPK - WeedMaps

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I guess my conversion from value to growth is complete ;D


Wondering what our weed experts ( AYR) think of this one. Here's a good description of WeedMaps:


There's two businesses here:


There's the B2B SaaS component (I believe this is the newer of the two businesses) where they sell software to help with backend management of inventory, compliance, customers, POS, fulfillment, data & analytics, order-ahead, etc etc. They call it business in a box. It's safe to say that there is a huge market for the products given the fragmentation of the industry and the signficant number of really small businesses (with limited headcount, experience, sophistication, etc.) operating in a space that's very complicated. They even have a wholesale marketplace for retailers that aren't vertically integrated to purchase branded products from producers.


The legacy business that everyone knows is the B2C business that looks like Yelp for cannabis dispensaries. To me, weedmaps is kind of the gateway into the legal cannabis purchasing universe. It allows you to find retailers, price shop, take advantage of deals, schedule delivery, order ahead, review different products...basically to learn about what's available in your neighborhood now that weed is legal in your state. Dispensaries are motivated to pay for sponsored ads as there are 10 million MAU on this platform...and I think the deck said over 90% smoke legal cannabis. It's the first mover and by far the best of it's kind. IMO, the weedmaps app is probably the first thing smokers download when they go to buy legal pot for the first time.



Going through the slide deck and presentation, I have to say I like:


First-mover with no real competition across all lines

Already profitable (barely)

Good customer engagement / spend

Network effect

Recurring revenue model

If you think of this as Google for weed, their cost per click is 1/5 Google's average cost. They may have pricing power.

Licensees steadily increase spend on WM over time, so WM is doing something right.


Growth is tied to licensee growth. Management claims most states currently have too FEW licensees to serve the public and expect a long runway not only in active states, but new ones (5 more states just legalized pot).


At first blush I have 3 issues / questions:


1) Will these dispensaries, many of which seem amateurish, get consolidated, instead of expanding? And if so, how would that impact WM?

2) Could Amazon just take this market? Or is this Etsy-like?

3) If weed is legalized federally, would the paring of regulations reduce WM's value proposition?


Valuation is downright cheap relative to other SPACS: EV 1.4B; EBITDA ~ $30MM. Growing ~40% CAGR.


Anecdotal: I asked the 5 people I know who smoke pot, and 4 gave WM a ringing endorsement.


Personal: Wife still thwarting my attempts to use WM to sample the product.


Presentation/ CC:










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This does look interesting, however I'd need to take a more thorough glance(hopefully tomorrow) because you always need to with these type of things. But my quick 30 minutes of looking around today raised a couple questions perhaps you could address.


1) The crux of this is basically that its a Shopify x Yelp x Craigslist for pot companies, no? IE the online presence/all in one internet setup/connect buyer and seller?

2) Do we have any info on their actual customers at this point?

3) Is there moat within their IP or are they simply hoping first mover type of thing holds?


I think its neat. Potentially even a great product offering in a fast growing niche. Bigger picture on pot though I do think eventually the state to state variance and regulatory issues coverage and dissipate as Federal restrictions wane. That is where AYR will make or break. Your head start is establishing brand power, customer relationships/loyalty and simply being recognizable on the largest scale possible. Once the things that make it very attractive right now, ie licensing restraints, state to state variances...once these go away, there is a potential for massive disruption and commoditization of the space. A big head start will be needed to hold advantages. For AYR for instance, wholesale advantage go away the second a dispensary can order a million pounds at $300 per pound from Mexico.


That said, simply getting a license, opening a shop, growing the dope, harvesting it and wholesaling....thats a really easy business to clean up in right now. Thats why I liked/like AYR. You can see a clear path, growth drivers, and moats, very clearly. To me, at least without diving in significantly deeper, its much less clear here how the cash cow runs wild and unchallenged for a long time here. Although that is not to say it cant. I'm hardly a Saas/tech guru, but selling flower and selling software are very different propositions.


Will follow up tomorrow with more thought but wanted to get something out there and maybe get the discussion flowing.

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There is limited info on this right now; I do think you have (1) right - but that's only part of their business and maybe not the best part.(2) and (3) I don't know yet.


Handicapping the federal regulatory issue seems key. My hunch is it will take a long time for there to be action on this front; it doesn't seem a high priority in Washington. I might be wrong about that. Interestingly, management frames eventual federal deregulation as beneficial, saying they can then (1) initiate a take on gross revenue through the website and (2) from a back-office perspective, help their customers manage the financial aspects of the business as well.


I agree this is more speculative than AYR, but until the idea gets killed the upside is interesting to me.

Thx for your input. Hopefully "the beast" Movys will weigh in.



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<Do we have any info on their actual customers at this point?>


Still pretty ignorant in this space, but here's what I've discovered from surfing the cannabis community.


Looks like it's been a love / hate relationship with the dispensaries in CA, which is 50% of their business. WM is the 800-lb gorilla, so retailers have little choice but to use WM to reach customers. But they hated the fact WM also published unlicensed dispensaries, who face none of the burdens the legit retailers do, and thus undercut the hell out of them. This has changed, though, because under regulatory pressure, WM stopped taking the black marketer's ads this year (it's debatable if they've dropped them all).


This is a big issue, because thanks to California's mismanagement, 75% of cannabis sales in CA are still black market. Hopefully WM realizes they should be part of the solution (cleaning up the black market), and not the problem (promoting it).


Separately, I do think WM does a good job on all the back-office SAAS stuff.


A risk here is from big ag/ big retail. What happens to these dispensaries if Walmart offers shelf space for cheap product? And if they do, why would they need WM in any way?


Yes, there's plenty that can go wrong here. But from a risk / reward approach, here's all that really matters:


They have a huge and entrenched head start in a long-runway industry; they are massively gathering data they can monetize later; and they welcome, inteasd of fearing, federal regulation.


Buying at a $1.4b market cap offers multi-bagger potential IMO.

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  • 4 weeks later...

Nice call on this.


Thanks. Still very early. This is off the radar of the CNBC crowd, but that will change when the deal is completed. Then we have  heady brew of a moaty SAAS play in a space prone to wild speculation. Good times.

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  • 4 months later...

So Q1 was pretty good. Revenue up 28% Y/Y. Earnings doubled. Cash flow from ops doubled to $10.5 MM.

I sold half during the spac bubble in January and will free-ride the rest. I still haven't figured out what happens if the industry concentrates- but I don't think that would be good for SSPK.



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Looks like SSPK is close to their June 10 vote - this PR just reminds stockholders to cast their votes in favor of the "merger" so they can change to "WM Holding Company LLC" ... just looking at SSPK's price chart for the last 12 months shows it was up at $29 in February and then declined until it was $14 on May 13.  Now it is at $17 and (speculation) looks like it's moving up again.  

Does anyone have any idea why the price moved so much since just February?  Is the price action of SSPK basically a "mirror" of whatever WeedMaps publishes as its quarterly results, if it even reports them?  


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SSPK spiked dramatically earlier this year and then collapsed, similar to all SPACs. From my little understanding, SPAC approval is more thorough then 12 months ago and SEC approval will help validate the financials and potential legal issues. Ideally as a standalone company it won't trade in line with SPACs but will have more focus on the financials.

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