‘This was a momentous election for the cannabis industry:’ Weedmaps

Yahoo Finance’s Alexis Christoforous and Chris Beals, CEO of WM Holding Co., the parent company of Weedmaps, discuss what Democratic control of Congress could mean for the cannabis industry.

Video Transcript

ALEXIS CHRISTOFOROUS: The cannabis advertising giant, Weed Maps, is going public on the NASDAQ via a SPAC. The merger with blank check acquisition firm, Silver Spike Acquisition, values Weed Maps at $1 and 1/2 billion. Joining me now is Chris Beals. He is CEO of WM Holding, the parent company of Weed Maps. And Chris, so good to have you on the show. All right, so right out of the gate, tell us why is now the right time to go public and why do it with a SPAC.

CHRIS BEALS: Yeah, look, I mean, we're a 12-year-old company, and we've been profitable our whole history. So we have a lot of momentum. You know, I think for us, the thing that was important is this is a momentous time for cannabis, where the cannabis marketplace meets SaaS provider, and we're right on the cusp with President Biden coming in. New heights in terms of cannabis, legalization expansion, and frankly, the need for our suite of SaaS products for businesses. And so, being able to reach a new audience of institutional investors, and then sort of go out and have dry powder for expansion, it just really felt like a perfect opportunity.

ALEXIS CHRISTOFOROUS: Yeah, you mentioned SaaS. For people who are unfamiliar, part of what you do is you sell a cloud-based operating system for marijuana businesses. So tell us what will the proceeds from this stock sale help Weed Maps be able to do.

CHRIS BEALS: Yeah, you know, I think that the real name of the game right now because with the number of new states we see on the horizon opening up, as well as expansion within these existing states that don't have enough retailers, I think having dry powder and optionality is really key. And part of that is, frankly, being able to invest more heavily in the people we have.

We are an engineering product and design shop, and so, being able to expand that. Potentially maybe accretive acquisitions and that sort of thing, but I would say just making sure that we're able to be as ubiquitous as possible at the exact moment each of these new markets look like they're going to open up. And that's really what this enables for us.

ALEXIS CHRISTOFOROUS: Chris, with new leadership in the White House, Democratic control of Congress, what impact do you think it's going to have on the cannabis industry?

CHRIS BEALS: Yeah, I mean, this was a momentous, momentous election for the cannabis industry at large. I think we'll see a couple things. I think, one, in November, we had six ballot initiatives in five states. All of those passed, opening up legalization. That's places like New Jersey, Mississippi, South Dakota, Arizona. So, first of all, those are going to come into effect, but separately, there are a lot of states that just don't have enough licenses yet. Illinois is a great example of this, where they're looking to move forward.

And I think what we're hearing from our policy team and folks on the ground is that this is being seen as an impetus for these jurisdictions to either increase the pace of licensing if they're already open, or if they haven't, to move forward with licensing.

And then, at the federal level, look, I think ultimately, the polling of voters has always been high. Over 90% support for medical at this point, almost 70% support for adult use. It's just a matter of moving it through. So I think now, with Democratic control across all three of both houses and presidential administration, I think you can see things like safe banking, as well as, yes, potentially federal legalization come into the view.

ALEXIS CHRISTOFOROUS: All right. Yeah, I'd love to get your take on the psychedelic substance space. It's been getting a lot of attention from investors. In fact, tomorrow, the first psychedelic ETF is going to be launching. Do you see that as competition at all for the cannabis industry in terms of getting investor attention and investor dollars?

CHRIS BEALS: Yeah, I mean, for us, as a software and tech company, I think people get the power of the two-sided marketplace we control in the SaaS piece. The tough part is always the intersection of explaining how that applies to an industry, especially highly regulated industries. Look, I think there are potentially some similarities in the psychedelic space, which is that for all intents and purposes, this is a pharmaceutical product. And it's going to need pharmaceutical class solutions. It's going to need education of consumers about a substance that they're ultimately going to put in their mouth or ingest in some way.

And so, I think to that end, it's thematically complementary to what we do, I think, in terms of how that market and how that industry plays out. I mean, look, cannabis has taken-- 1996 was when California first passed Prop 215. So I think we're really in the-- not even the first inning-- the warm-up before the game when it comes to something like psychedelics.

ALEXIS CHRISTOFOROUS: All right, and I want to talk for a moment about headwinds. Because I know that Weed Maps is the focus of a grand jury subpoena investigation, along with about a few dozen other cannabis-related companies. And some legal experts say this could be a milestone case. It could possibly set legal precedent for the industry. Do you see that as a risk for the industry and your company in particular going forward?

CHRIS BEALS: No, I don't see it that way at all. I mean, look, while we don't comment on specific legal matters, I think what I can say is that, you know, ultimately, we're a compliant software company. We build compliance in everything we do. And I think while given our size and our dominant position, it's natural to receive inquiries. I mean, that's just part of, I think, the industry at large.

But really, I think there are two things that we see. One is with the incoming presidential administration. Focusing on a path towards legalization is sort of, I think, the direction we're going to see at the federal level. And separately, I think along with that, it's going to be an emphasis on criminal justice reform. And when we look at the priorities of this administration, I think it's really going to be around, how do we get to federal legalization? How do we sort of redress the historical harms of the war on drugs?

ALEXIS CHRISTOFOROUS: All right, we're going to leave it there. Chris Beals, CEO of the parent company of Weed Maps, thanks for being with us. And we're going to look out for your market debut in the second quarter. Best of luck.

CHRIS BEALS: Thanks so much. I appreciate it.