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He Bought GameStop Before It Mooned. This Is The MicroCap Stock He Owns Today
01:00:09
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- [00:00]
Ryan Henderson
This episode is presented by Interactive Brokers. You research your investments, but did you research your broker? In 2025, IBKR retail clients averaged a 19.2% return, beating the S&P 500's 17.9% over time, the broker you choose makes a difference. If you want to learn why, head on over to ibkr.com 2025 more on this later in the show.
- [00:28]
Brett Shafer
Welcome to Chit Chat Stocks. On this show, hosts Ryan Henderson and Brett Shafer analyze businesses and riff on the world of investing. As a quick reminder, Chitchat Stocks is a CCM Media Group podcast. Anything discussed on Chitchat Stocks by Ryan, Brett or any other podcast guest is not formal advice or recommendation. Now please enjoy this episode.
- [00:55]
Podcast Host / Moderator
Welcome into the Chitchat Stocks Podcast, a podcast to help you find your next great investment. Today we bring back on Rod Alsman, an individual investor who manages his own book and is actually one of the early GameStop investors we've had on before to discuss other companies. People can go back and listen to those episodes if they want, but today we wanted to bring him back on because he's been writing on his substack, which we'll have a link to in the show. Notes an interesting new potential opportunity to discuss with D WM Technology, AKA Weed Maps. Rod is currently a large investor in the business and Ryan and I are currently not shareholders. But I said since it's a small micro cap, we should say what our rules are around publishing and buying stocks. We may or may not own shares after this episode is there given our 48 hour rules. So essentially we don't in order to, you know, keep things aligned with our listeners, we want to make sure that we don't buy anything right after something is published. That's how we just want to our own rules. Rod will also give a disclosure, but let's get into the questions and Rod, you can put the disclosure in your disclaimer before we get into this first one, WM technology is down 97% in the past five years. Let's just start out with why, why, why is the stock so so beaten down?
- [02:07]
Rod Alsman
Loaded. First question 97. That's a big number. Well look, I. I just need to get a little disclaimer out of the way. We don't have to keep harping on it. But I do need to note that before we start need to be transparent about my position and my limitations here. So I beneficially own well in excess of 2 million shares of maps Class A common stock inclusive of shares underlying immediately exercisable derivative instruments. I have a material financial interest in the stock going higher. Hope that's clear. Nothing I say today is investment advice. I'm sharing my independent analytical views based entirely on publicly available SEC filings and enacted legislation. I may buy or sell at any time without notice. I also want to note that portions of my published analytical work were developed with the assistance of AI tools. All inputs, assumptions and conclusions though, are my own. I've verified all citations against primary sources. So to get to your question on why weedmaps, I'll refer to it as Maps or Weed Maps interchangeably. You know WM Technology Inc. Is the formal corporate name, but I don't think most people know of it like that. We need to go back to 5ish years ago. We're in SPAC mania. We're amidst meme mania. Stock went public in June 2021, just a few months after the GameStop mania, depending on what your preferred naming of that is that I was a substantial beneficiary of. I published GMEDD research report on I think it was January 20th or 21st, 2021. So within a week of publishing that research report, the stock literally went to the moon. It was quite a life changing experience. I got to participate in the Odd Lots podcast on that Thursday morning. The stock made all time highs recording it and seeing it happen in real time. It was just once in a lifetime lived experience of mine. So with that grounding of this happening in the months following they went public via SPAC at an implied valuation of one and a half billion dollars during the peak of the cannabis SPAC bubble. Right? So it's down a lot. You mentioned 97. I think that's from the high points which it did run up. Right? Most SPACs of course IPO at the $10 mark with warrant instruments. I'm not going to get into all that, but it's safe to say that just about every cannabis adjacent public company has been destroyed, delisted, decimated, Leafly, a pretty close comp to weedmaps was delisted in January of 25 Tilray also down 95% MSOS ETF. You know the multi state operators down over 80%. So sector wide carnage is a big element of that decline. I'm not saying there aren't idiosyncratic reasons for weedmaps deterioration. We can talk about some of that. You know the company specific factors are a compounding element. So okay, 1.5 billion valuation. They clearly had growth baked in and a view that there would be growth or they being market Participants at the time. For full disclosure, I did not take a stake in this company until February of 2024 sub $1 per share. So I have not borne that pain myself that some early investors have and I can empathize with them. But the company's deteriorated from an operating perspective somewhat and it has not lived up to expectations. Revenue had peaked around 210 million and now it's around approximately 175 million. Because mature markets, you know, California represents a majority of their revenue, Michigan has and Oklahoma states, you know, in maturity for cannabis have generally experienced pricing compression and operator consolidation. You need to think about from the vantage point of these who is their customer? Their customer is a licensed cannabis dispensary. So those businesses face this onerous tax burden under 280E because cannabis is still a Schedule 1 drug under federal law. It's illegal under federal law even though it's legal in a majority of the states. You can, I've bought it legally in many states myself personally, or at least under state law legally, but it's still a federal crime. And being a Schedule 1 drug, 280E is a very punitive tax burden. So operators cannot deduct ordinary business expenses, their marketing expenses. The regular OPEX is not deductible. So their effective tax rates are instead of the 21 corporate tax plus whatever state you're talking about a 70 plus percent punitive effective tax rate. So it consumes a large portion of their gross profits, it depresses their marketing budgets and that directly impacts what dispensaries have available to spend on weedmaps. A few other things. NASDAQ deficiency notice was received on February 4th. They filed the 8K. So that creates a mechanical selling pressure. You have active funds that may have listing quality requirements that are automatically liquidating with no consideration for intrinsic value. And of course the fourth quarter earnings release in March, the 10k filing came out the same day as the earnings on March 12. That was very much a kitchen sink quarter in my view. You had a $7.1 million goodwill impairment, you had a $2.8 million settlement class action agreement in principle that they took the booked the charge for even though the event occurred after the period close. Under accounting rules they take the charge in 4Q and then there was 4.4 million credit loss provision in addition to a substantial accounts receivable build. So there are some non recurring charges that obscure their underlying earnings power. I think because that 97% decline, it looks magnificent in the negative sense when you actually strip that all away and you look at what is this business. You have a company with $62.4 million in cash on its balance sheet. If you look at the class A common stock and the class V units, you need to consider those and you're fully kind of diluted. You get to about 159 million units. I exclude the warrants altogether. They have an 1150 strike. This stock is so far. Those are so far out of the money and they expire in June. Under no reasonable circumstance do I see those being dilutive instruments. So 159, you divide, you know, the 62.4 million cash. We're just shy of $0.40 per share of cash. We're trading at 65ish cents right now. So $0.25 for the operating business. No debt. Yeah, there is operating leases, but you can't burden both the operating line and the balance sheet. You got to put it in one place and let's leave it in the income statement. They're paying those lease expenses. Let's not consider that debt. Right, right. Depending on how your accounting view works. 40 million 39.8. But 40 million in adjusted EBITDA, you've got gross margins. This is a software platform business. And then 5,200 paying cannabis dispensary clients. So it's not that the enterprise is impaired. I think that it's the stock price that's impaired.
- [09:33]
Ryan Henderson
Okay. And we're going to get more into some of the catalysts as well as the, I guess, discussion around what's happening with the stock in a sec. But let's talk about the business. Most people are listening to the show, I'm guessing, have no idea what to do. So what exactly is the business and how do they make money?
- [09:55]
Rod Alsman
I don't know, Ryan. That might be a little naive to say. No one's used weed maps in order to locate their dispensary to fulfill their consumer needs. But look, it's, it's essentially the yelp of cannabis. It's a two sided marketplace. And from a consumer discovery lens, they are the dominant marketplace. They were founded in 08. So they do have a first mover advantage in this space. You know, we're at this point going on what, 18. This is their 18th year network effects, I know you guys have talked about those. And from a competitive advantage lens, that is clearly an area of, of strength for them. They have an early mover advantage and they are the largest they supply. Depending on your denominator of dispensaries, licensed dispensaries, we're pushing upwards of 40% of licensed dispensaries nationwide. So they are the largest player in that space. Consumers go where the dispensaries are listed and the dispensaries are going to therefore list where the consumers search. So revenue is going to come through from three streams there you've got SaaS, subscriptions, weed maps for business. So these dispensaries get listing management, compliance tools, point of sale integration, analytics, advertising is the biggest bucket. So featured listings, deal promotions, banner ads, the dispensaries you're paying to get that visibility on the marketplace. And then third, got some ordering in E commerce. So WM orders facilitating online ordering through the platform, driving transaction volume. And it's important here, getting back to the early part of the conversation, this is still federally illegal. It is still a Schedule 1 drug with no known medical use. So critically, mainstream tech platforms won't fully serve this vertical at present. Google restricts cannabis advertising, Apple restricts cannabis apps. Payment processors block cannabis transactions. If you've ever as a consumer wanted to go in and use your credit card, it's not as simple as that. You might need to go use their ATM to withdraw cash or they might have some ach transaction structure to get around the limitations in banking. So it is, you know, it forces dispensaries into cannabis specific platforms. It is therefore kind of a niche and they are the dominant player in this niche. Federal illegality is actually the moat in this case because it keeps the big players out of the marketplace.
- [12:26]
Ryan Henderson
I was about to ask if it was federally legalized, is that going, Would you see that as something that's going to really hurt the business?
- [12:38]
Rod Alsman
It's a real question. And then the question becomes two sided. How much does the TAM expand if you get a descheduling event? So there was reporting just what is today 23rd. It was I think March 5th in a marijuana moment. So this is the same publication that had essentially in advance reported on the December 2025 rescheduling executive order from President Trump. This current reporting is that he is considering announcing this summer a descheduling commission that would investigate moving it from not just the rescheduling element from 1 to 3, which would eliminate that onerous tax element, the 280E element, but altogether investigating and reporting back within 180 days on descheduling. So you're right, it would definitely widen the risks from competitors stepping in. They obviously have the early advantage. And there is a disparate like each state has different compliance rules in terms of what is and isn't permissible. So when you have a niche like that, it does become, you know, how can we get involved with it, you know, across the entire operating landscape without having to incur undue upfront costs as we try to then disintermediate the incumbent? I think it's hard to know precisely if federal descheduling would be a net negative or net positive. But it really to me depends on is your view that that network effect that they've built is substantial enough to withstand some of that incremental competition? And how large does the market become? Is there enough room, you know, with the network effects being what they are? Will it be that we don't need to go to EMAPs anymore at all? And that's, that's a possible risk.
- [14:34]
Ryan Henderson
One more question before we get into sort of your conversations with the board and other aspects of the thesis. What has its growth looked like for weedmaps?
- [14:46]
Rod Alsman
It hasn't. You've got year over year on the top line pretty flat. If you were to look at the, you know, from an operating metric perspective, I think there's two key ones. So the number of dispensaries and then the average revenue, the ARPU for these dispensaries. And they've been pretty flattish. So my view is actually that we are in a trough when it comes to the kind of operating landscape, given the executive order that I mentioned. That is a unknown timing, but it seems to me a. It's not a matter of if it will be rescheduled, but when secondarily like on the forward look. Because again, we can all look at the trailing financials, we can all see what reality is. This does not look like a growth business when you look at the trailing operating performance. But you have to look forward. The hemp ban, the federal hemp ban. If you guys have ever gone into a gas station or wherever and seen the Delta 8, Delta Dummies or Delta 9 kind of alternative hemp derived products that is a substantial multi tens of billion market. And that opened up in 2018 as a result of the farm Bill. Some people perceived it as a loophole, depending on your viewpoint. But nonetheless that hemp loophole has been closed in the bill that was passed to reopen the government in November of 2025. So effective November 12, 2026, that federal hemp ban is reinstated. So I see that as an anti headwind that essentially will push consumers who would have been substituting licensed cannabis dispensary products with hemp products back into the licensed cannabis dispensary intake. So I have that sized as a benefit to the company going forward. And then there are state level legislative moves that are beneficial to the company, a big one that frankly I don't see people sizing. I had a conversation as a matter of fact on Friday with a sell side analyst that covers the company and when I asked him about it, he hadn't sized it and he wasn't going to publish research update because from a career risk perspective he's not hearing interest from institutions and what's in it for me.
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Podcast Host / Moderator
Right.
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Rod Alsman
Why am I going to publish research on this micro cap that no one's really interested in and go out on a limb. I'm not and I get that. I respect that the incentives aren't there for him. For me as a shareholder, I want to put that view out there. I'm still waiting on the governor of Virginia to sign the bills into law that the General Assembly House and senate passed on March 13th and 14th. But let me kind of walk you through why I see that as beneficial. And again like you know, to your question Ryan, it doesn't look like a great growth story on a trailing lens but we have to consider the operative realities at hand here. So when you have a state of Virginia, a roughly top 10 at the bottom 10 state sizing we're talking about, I think it's about 9 million residents in the state of Virginia that passes an adult use Cannabis bill on March 14th pending the governor's signature. She has until April 13th to sign this thing. She campaigned, Governor Spamberger campaigned on signing it. So I don't see why she wouldn't either sign it or if she has any amendment proposals. That's a possibility. But the bill itself is substantial. So it authorizes up to 350 licensees through January 2028. And now after January of 2028 the Cannabis Control Authority, the CCA in Virginia would have the ability to expand the number of licensees issued. But when you think about it for weedmaps, one way you could size the opportunity would be okay give them their penetration rate at the national level that roughly 40% that they get new licensed businesses. You just layer on top the average revenue per user. You can look and see in the Virginia bill that the advertising restrictions are are substantial. So for example you can't have outdoor billboard displays. There's some limitations on what that there can't really be direct pricing displayed by the dispensaries. So it's very in line with Weedmap's directory oriented business model where it essentially becomes the cleanest means for a licensed dispensary to get its products out in front of the consumers of know using that two sided marketplace that they have. So the way I see it is, okay, you can't just look at the company's actual margins. You have to think about it from an incremental. You guys are platform investors who know when you have a very substantial amount of your fixed costs that are already covered. This is an incremental. We need to look at cost of revs, revs cost of sales and marketing. So I have incremental EBITDA margins on this in the mid-70s to mid-80s. You know, think about a baseline in the high 70s. So layer, you know, call it high 70s incremental EBITDA margin on a. And I've only sized it going out to say year five. I've sized it using there's a department of Planning and budget in the state of Virginia, the DPB as well as the legislative sponsors have, you know there's two ranges, right? DPB on the low end saying what we think the tax receipts will be. And DPB only sized the 2025 bill. So this new bill is substantially larger. So it's inherently conservative using the prior bill sizing. When you look at the midpoint value, for example, using a low end bracketing of comparable SaaS platforms as your exit multiple on that incremental EBITDA and a modest discount rate just on the year 5 terminal value of Virginia alone, I come to a midpoint that's close to the current market cap and that already fails to include the $0.40 IST per share of cash on the books.
- [21:12]
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- [22:00]
Podcast Host / Moderator
Okay, let's talk more into your thesis. We'll have a link in the show notes to the detailed substack write up which is completely free. People can go check that out what about a potential acquisition who could potentially acquire them? What do you see here? What are the avenues? Is it private equity? Is it, is it like a leverage or some sort of buyout firm? Or is it some other player in the space? What are your thoughts here? What do you think could work out and be of help to shareholders?
- [22:29]
Rod Alsman
So look, we have to look at what's actually transpired and you can read all the filings, you can read all of the news. Dec. 17, the co founders group made an offer to buy the company. The shares they don't already own. At the time they owned roughly one third, just shy of 1/3, but for simple math, call it 1/3 of the company. And they made an offer for the rest of the company they didn't own at A$70. And in that initial offer that was non binding, they noted that they had had conversations with financing partners and they expected to get to a closed deal within three to four weeks. What happened 27 days later? The DEA judge that was essentially overseeing, if you recall, the Biden administration had begun moving the ball forward on rescheduling. And the DEA judge overseeing that process issued an order that essentially froze rescheduling in stasis. So Judge Mull, I can't think of his full name right now, but you can, you know, at your own time, look him up, see what he did on January 13 essentially eliminated the sense of urgency because my view is that rescheduling is accretive to the business. The 10K discusses how they perceive it and there are some puts and takes. However, when you offer $1.70 per share for the shares you don't already own, presumably you see an opportunity for a substantial return on that investment to take the company back private. You're not doing it as a goodwill gesture. You might want people to perceive it that way because you might position it as a large premium to a depressed share price. But I tend to think that the co founders are interested in making money. So after that initial offer was made in December, that event happened in January, go forward another few months. We remember last April with Liberation Day, credit spreads went to the moon. My view is that net of those two events, the sense of urgency or even the capacity to finance was eliminated by then. However, they waited until the day before the annual meeting, June 23, to formally withdraw the offer with an express reservation to return. And that's an important piece here because it's not that they said, we're not ever going to come back to the table. They said one day before the shareholder meeting that we are going to. For now, table it and we may come back. So my perspective was informed by the Trump executive order in December of 2025. To me, that was the starting gun of this slew of governance events that have happened year to date. 2026, so December 18th, fast forward five or six weeks, you get to late January, early February, and you get this beginning of a cluster of events that, taken in isolation, perhaps you could make a credible argument that this is just standard housekeeping. I have, as you alluded to, written the board a few times. It was pure coincidence. I want to be clear. It was purely coincidental. My first letter was dated and it was just an email. I didn't initially send that via certified mail, although it was sent subsequently via certified mail as an attachment, as an exhibit. Because I had seen the executive order, I had been a shareholder. I wanted the company to have, based on my understanding of accounting rules, incremental disclosures around what this language is for, directing the Attorney General to, in the most expeditious way possible. And the 10k now includes some of that language. Reschedule marijuana. I wanted them to include 10k disclosure so that other market participants could appreciate the benefits of what President Trump's executive order would mean for the business. Coincidentally, within a few days, There was an 8K filing in early February, February 3, that indicated they had made the CFO permanent, which is one deal prep potential item. Second, that they'd added two independent directors to the board, which they'd already indicated they would have a special committee comprised of independent directors in that first go around. So I saw those events happen, and that read to me like, we also saw the Trump executive order, and we now see this as our signal to begin this process again or start the process back up again. It's not a cold start, per se. I cannot say with certitude without seeing the board minutes, but at least from the public filing side of things, it appears that the process was never fully shelved. It was paused. So you saw that happen on the governance side, with the CFO made permanent, two independent directors added. Two days later, you get the. On the fifth, the 8K filing indicating they received the deficiency notice on February 4th. Okay, go forward just a few more days from that, on February 12th. And this was not communicated by the company, but it was part of the public docket, the class action lawsuit that they had. They reached a preliminary agreement in principle to settle that. So that would be a significant contingent liability that might prevent clean financing or a deal to be consummated. So it would make sense that if you were looking to return to the table, you would want to clear that off of the books in advance. And of course, it helped to further depress the fourth quarter net line for earnings. So those events transpired throughout February. I sent my correspondence, a few pieces of correspondence as these events continued. I wanted to protect my rights as a minority shareholder of this Delaware corporation. And then we got a third independent Director added on March 3rd, Excuse me, March 5th. The 8K was filed on March 10th, just a few days before the fourth quarter was reported, and the 10K came out on March 12th. So there were a lot of events that read to me like in conjunction with the public reporting about rescheduling, you know, we want to act. And I would add that the company has to file its definitive 14, its DEF14, its proxy statement by the end of April. So from the research I've done, management buyouts modally occur in the second quarter during the information asymmetric period in which, especially after a kitchen sinked fourth quarter, there is an opportunity to utilize a depressed and information asymmetric environment to potentially come back to the table. I have no insight into whether there's an active negotiation at all or if one will come to fruition. I can simply assess what I've seen in the public record and reach my conclusion and take the steps that I've taken as a minority shareholder to put things into the record that I believe are important to ensure that a fair process is followed for the benefit of all shareholders.
- [30:23]
Podcast Host / Moderator
Let's talk about some other things that you've written about, some other things the company may or may not be optimizing on their own balance sheet. You have the TRA liability, which is a tax receivable agreement. Maybe talk through the details of that, why that's important for the potential developments of the company. And what I'd say is, maybe I'll say it for you, clear mismanagement of the treasury and just not sacrificing free net interest income that you can get with that pile of cash.
- [30:53]
Rod Alsman
Yeah. The tax receivable agreement is a serious dampening effect on this company's kind of ability. Or you think about how I want to phrase this. The 10k, for example, you can look at the 10k and it discloses that a change of control would accelerate the tax receivable agreement. So there would then be a lump sum payment of up to approximately $138.9 million, which that's more than the current market cap, right? So we're not talking an immaterial sum and that would be payable to the co founders as the TRA beneficiaries. So any third party acquirer think if a doordash wanted to, you know, acquire weed maps as a means to get scaled, entry into this in advance of rescheduling or what have you, that would have to be paid in full and that benefit would solely be paid to the co founders, the TRA beneficiaries. So whether the co founders are the buyer or the seller, they get that incremental benefit either way. They in their own proposal letter from that initial December 24 offer had said that the liability exceeds 100 million and that they would vote against any outside offer. So if there were any sort of go shop process that the special committee were to conduct against that structural bid deterrent, where a competing bidder would essentially be paying nearly $1 per share more than they'd otherwise to the that the co founders, you know, in order to deliver the same per share price, in my view, that would not be any meaningful evidence that the market was tested. It's a structural asymmetry that should inform how any fairness analysis evaluates the deal price. And then on the treasury mismanagement thread that you pulled. So I had, after I sent my second letter to the board on February 9, after I had seen the two 8K filings that happened to come right after I sent my first letter at the end of January pertaining to the what I had hoped to see that I didn't see in the 10k pertaining to disclosure around the the effects of rescheduling. I went through and I did a forensic audit of the company's balance sheet and income statements and all of the financial statements. And what I concluded was that I documented approximately 3.9 million in cumulative interest income forfeiture. So, right. Interest rates, of course we all remember were on the floor in 2021. At the end of 22, they started to go to the moon, so to speak, or at least relatively speaking. And the company held tens of millions of dollars in cash throughout that period when the fed funds rate was above 5%. So they could have simply used a Treasury bill ladder, a money market fund, anything. And instead if you look in 2023, I believe it was about 10 basis points of yield. In 2024, I think it was like 90 basis points of yield on again, substantial cash balances and the cumulative sum was actually in excess of the full year 2025 net income. So we're not talking an immaterial sum of forsaken interest income and I transmitted that analysis to the board and the audit committee in February. They filed the 10k in March with no disclosure addressing it and no substantive response to my concerns.
- [34:33]
Ryan Henderson
What is the, what is the point? It sounds like they've just got it in some low yielding bank account or whatever. What's the point of them not collecting the interest? Is there a rationale from their side? They think they need the cash.
- [34:51]
Rod Alsman
I did I think in the letter ask to try and understand if there was a minimum liquidity consideration. I never received any response to my request. I don't think there's a disclosed why they see a need to carry such a substantial. I could speculate. Let me be clear, this is a speculation but in my speculative view that cash on the balance sheet can serve a prospective acquirer to minimize the amount of cash that they need from an external financing perspective. So should there be a renewed effort to take the company private that 60/2 million a substantial portion. Right. This is a cat, you know, a platform business that doesn't have massive capex needs they could utilize a portion of that to reduce the amount of debt they need to raise to conduct a management buyout.
- [35:49]
Ryan Henderson
Okay, we've talked a little bit about your conversations with the board so far. Is there anything we haven't discussed? Maybe go through, give us sort of a timeline of everything that you've talked about with the board and any extra thoughts there?
- [36:06]
Rod Alsman
Well it's been a one sided conversation. I have sent as of our recording date four letters with at least three substantial requests and there's been no engagement from the board from pertaining to any of those.
- [36:24]
Podcast Host / Moderator
And what percentage of the outstanding shares do you own right now just for
- [36:28]
Rod Alsman
reference you're not so I disclaimed that I beneficially own well in excess of 2 million. Now remember there is a class A and a class V. So the class A from the lens of the class V that the founders own, co founders own is. Has voting rights but no economic rights but is exchangeable into class A. So it's, it's functionally like they could. But remember if there's any renewed transaction it would be a majority of the minority would be the hurdle that they would need to clear from a voting perspective. So that reduces the actual denominator. The denominator of all of class A would be reduced by interested parties ownership. So the math does become different when you think about my numerator being enlarged against that reduced denominator on a percent basis. So I mean look I want to be clear, I'm not trying to block anything. I'm trying to build a better process for protect my minority shareholder rights and ensure that should there be a renewed bid or deal or offer or whatever, that I've raised the clearing price in a way that makes some opportunistic action perhaps less desirable than it might have been in the absence of my actions.
- [38:06]
Ryan Henderson
Yeah, let's talk risks to the business. Aside from. Well, I guess we already kind of talked about potentially federal legalization and how you view that. Are there any other big risks to the business that you see?
- [38:20]
Rod Alsman
Look, I mean, if there's no take private, if there's a continued revenue decline, if rescheduling is permanently stalled, if they opt to delist entirely from NASDAQ with no cure, or if they opt to cure through a what is typically a value destructive means of a reverse split. I did bring to the board's attention an alternative cure would be an issuer tender at an appropriate price level. While I bracketed the founder's offer with my proposed remedy, which was a modified Dutch auction between $1.60 and $1.80 per share. You know, any issuer action of that nature in excess of the $1 bid deficiency should be a reasonable cure that would also be accretive to all shareholders. Right. If you're buying, let's use $1.20 as an example. Just as an example, we have roughly $0.40 per share, just shy of $0.40 per share. So that means the operating business at that point is 80 cents times for simple math we'll say 160. It's 159, but let's call it 160.
- [39:40]
Podcast Host / Moderator
Right.
- [39:41]
Rod Alsman
So that implies a 128 million enterprise value on just about 40 million. So we're talking about 3.2 ish EV to EBITDA is the multiple that they would be repurchasing stock at in that scenario. That would cure the bid deficiency and also return what appears to me to be substantial excess cash to shareholders. So there are, you know, it could absolutely go wrong. Generally speaking, as far as I've come to research, the founders have substant. The co founders have substantial portions of their investable assets in the company. So I, I can't see why it would be rational to nuke things altogether. But look, there, there could be a credit market seizure, for example. There's obviously been a lot of issues going on in Iran and credit spreads have widened over the last month and a half with all the kind of private credit noise too. Permeating the market so that could prevent any LBO or MBO financing. We talked earlier about a full on descheduling that could happen. It doesn't seem like it'll happen anytime imminently. But if there were a full descheduling and then gradually Google ate their lunch and Weed Maps wasn't able to defensively establish their competitive advantages in this new landscape, that could be downside. But I just look at the enacted law, the hemp ban, the Virginia Catalyst that again just pending the governor's signature and that goes into effect 1-1-27. In terms of adult use legal sales in the state, I see probability weighted value north of 250 at this point even before taking into account the Virginia Catalyst. So we'll have 1Q earnings that come and normalize post the 4Q kitchen sink and the stock may recover on its own merits. I can't say what the future will be, but what I can say is the future to me looks far less bleak than what the current share price implies.
- [41:57]
Podcast Host / Moderator
Okay, let's go through. It's an interesting situation. There's a lot of things that can happen given what the board or the management team decides to do. Given what happens with the actual business legalization. What are some scenarios you have in your head or that you've been looking at analyzing business that would cause the stock to quantify, unquote work. I mean you, you've outlined an intrinsic value in the 2 to $3 range. We can get into that math as well. Maybe, maybe after. But what do you think? Like generally like okay, this happens and the stock starts working and like what are the probabilities there? I, I don't know. How are you looking at that as someone who kind of is a deep value net net guy, Take us through that.
- [42:39]
Rod Alsman
Look, I mean it, I kind of I think said that just before. But just to be clear, what would make it work would be a take private at fair value, a price reflective of the cash balance and normalized earnings power, the enacted Virginia Catalyst and the probability weighted regulatory upsides. And that's where I see fair value north of 250. You know, even excluding Virginia, I see it north of 250. And that had that Virginia event had happened the 13th is when I published my one day less than 24 hours after the 10k came out. I published my initial valuation view. Once I had the 10k data and I was able to really give what is with the freshest data and that's inclusive. Again, you don't look at a business On a non normalized earnings basis you shouldn't, at least you shouldn't consider, you know, a one time goodwill impairment or for example, they took a two plus million dollar Amazon Web Services charge that they explicitly note is because of their efficiency, that they weren't going to utilize full committed amounts. So because you're going to be more efficient operators in the future, you had to take a charge. So yes, you, you took a hit to your current, your, your trailing earnings but on a forward basis you should actually be providing, performing better. So you have to look forward and look at the reality of rescheduling completion. That's going to eliminate 280E and drive some organic re rating. I think once Virginia's governor signs, you get visible new market revenue growth. And the hemp ban as I noted, goes into effect in November. So as we draw closer to that and people begin to realize that oh, you're going to force some spending back into the licensed dispensary channels. I think those items could all help the stock recover. First quarter earnings being normalized post kitchen sink. And of course if the company uses a shareholder accretive mechanism to cure the deficiency, that, that as well.
- [44:44]
Podcast Host / Moderator
We haven't hit on this too much, but the actual cannabis market has gone through a huge boom and bust. There was the boom and maybe we could call that 2017-2021, something like that. And we've seen just many, many years now of oversupply, price decreases, dispensaries going out of business and there's been just a supply, maybe an oversupply that's just been contracting. Do you think we're at a point where, you know, and this has shown up in Weedmaps financials? Do you think we're at a point where we might be at the trough you mentioned at the beginning, but maybe any details on that, any evidence that. All right, well why not? Why is that going to happen this year and not 2027, 2028, 2029?
- [45:26]
Rod Alsman
I think it's the regulatory environment. And that's where the question mark to me is not a matter of if there's a regulatory environmental change that is, that validates what you just said. That is also my view that we are at an operating trough. It's not an if to me. You know, look, the President is very famously fickle. However, it does seem that there's been consistency pertaining to federal legalization or minimum descheduling or sorry, rescheduling his executive order implies that it may not come this quarter, it may not come next quarter. But when you look out over a business is not valued over quarters or shouldn't be, it's valued over years. And when you look out over an operating environment that should reflect those operative realities net of the hemp band 280E being removed from its client base. You know, look, it's still a pretty steady eddy. Like if you actually look at the last. I'm looking at their latest investor deck, for example, just to have the images cleanly in front of me. And between 1Q24 and 4Q25, their average monthly paying client mix has ranged from about 4900 to about 5200 and change. So we're not talking about massive swings in mix. You mentioned some dispensaries are obviously going out of business. Some dispensaries are coming into business. The new states coming online does provide a pipeline that's obviously fed into that. That alleviates some of the competitive pressures in states like California, Michigan, where race to the bottom pricing coupled with the onerous tax treatment has made it tough for dispensaries to do well. So they did make some changes to their kind of product orientation that lowered ARPU or monthly rev per paying client. But even so, that number has stayed. It's shy of 3,000, but it's in the high, it's in the 2,800 range for full year 25. So you know, it's not as. It doesn't look like a business to me that's failing. It looks like a business to me that's been a. That's, that's. It may be the last man standing, if you will. When you think about Leafly being delisted and you look at their actual balance sheet, you know this. But for last quarter, which if you look at the account receivables build, there was a big question mark that I had there. But for last quarter where there was a slight cash quarter over quarter decline, they had had cash build for almost three years straight. So it's not as if this is a business that, you know, consumes cash. It doesn't. I don't see a reason why, like if we go back to 1Q24, they ended 1Q24 with 36 million. They ended 4Q25 with 62 million, nearly double. I expect that as we move through 2026, they'll continue to build cash. The question then becomes what do they do with it? And to date, the governance has left a lot to be desired. But I get back to, we can see what they made an offer they reserved the right to return. These governance actions have all occurred in the preceding months and there does appear to be a window of opportunity that there may be a very depressed base to bid against. And I would just simply reiterate that fair market value is the hurdle that needs to be cleared, not a premium to a depressed price.
- [49:04]
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- [50:05]
Podcast Host / Moderator
That's a good way to put it and let me even put the valuation in a different light. I know there's some accounting stuff that can change this slightly, but even if we exclude the cash on the balance sheet, if we look at our friends at Fiscal AI, this is a good way to highlight our advertising partner here. Use our link Fiscal AI chitchat they even have all the financial analysis you'd need for small companies such as Weedmaps. Thousands and thousands of businesses listed on there, they're priced to gross profit. So this isn't sales. And yeah it's a high margin gross profit business but their price to gross profit is well below 1 over the last 12 months. And yeah, the operating earnings don't look great, but as Rod mentioned there could be some opportunity here where the forward looking operating earnings or EBD are significantly higher. So you look at that. I mean that's kind of the top line metric we like to look at for businesses. Especially for a company that might be, you know, the trailing learnings might not be that great. I mean sub 1 times price to gross profit maybe even sub is 0.5 times depending on how you define it. That that is quite a discount in multiple if they can get their act together and generate positive GAAP operating income, positive gap ebitda, stuff like that. And I will. Hi once again fiscal AI chitchat. Go check them out in the show notes Rob.
- [51:20]
Rod Alsman
Less than one times. It's less than one times trailing EV to ebitda. Not even just gross profit. We're talking less than one time. So, so right now the enterprise value I'm referring to the adjusted EBITDA that they put in their own bridge. I'm not making a number up. I mean we could, we could say that's a made up number. But let's use the adjusted EBITDA that they report of 39.8 million. So as of right now I see 63 cent spot. So 63 times 159 gets you to 100. Now let's back out the 62.4 million cash that gets you to you know, 38. Well they're at 39.8 for trailing EBITDA. So right there you're below 1. That is not common to see a dominant SaaS marketplace trading at less than 1 times EV to EBITDA. And there are certainly some reasons, some idiosyncratic and some sectoral for the depressed view. But I don't believe personally that that's a indication of fair market value. I think that's more of a indication of there are simply not people interested in buying the stock today. For certain, the deficiency notice prevents a lot of institutions from being able to participate. I even know that I was brought to my attention multiple retail brokerages are not allowing investors to buy this security because of it trading with a deficiency notice being a low price security at least. Merrill, I included a screenshot of that in my latest post and I know it was made aware. Tasty trade as well as was at some point at least preventing purchases. So you know, just because people cannot buy the stock does not mean it's a fair price. Yeah, I imagine.
- [53:11]
Podcast Host / Moderator
Ryan, go ahead.
- [53:11]
Ryan Henderson
I was going to say I imagine especially as the price comes down more and more you see a lot of indiscriminate selling just totally ignoring any sort of valuation work or like you said, the inability to buy for certain people. Let's maybe wrap up with this question. Unless you have anything else on your on your mind that you want to talk about. But what do you think investors are most missing about weed maps or WM Tech, the stock right now.
- [53:44]
Rod Alsman
So I'll answer the first part and then I'll get to your question. Because when you look at it from the outside view, you don't do any work on the governance signals that I mentioned. You just look at the trailing financial statements on their face. You don't look at normalize their earnings. I can entirely appreciate why mechanically I've been observing this. You know, Robinhood does provide this data on a day to day basis and I don't know precisely how accurate it is, but I'm going to go to my Robinhood screen here just so I can make sure I'm at least accurately conveying what I see. And what I'm getting at is this looks like an interesting short. From a mechanical lens I could see why. For example, go back to February, we get the deficiency notice. So February 3rd, the last day before the notice became public, Robinhood has 2.589 million shares short, a little under 3% over the ensuing few weeks. We did have the Sass Apocalypse catastrophe, insert whatever name here. So some of that was sectoral and some of that was idiosyncratic from the deficiency. But in just one week's time, from the 3rd to the 10th, we went from 2.589 to 3.586. So an incremental million shares shorted in that period. Fast forward all the way to the latest data that I see. Or rather let me go to the day before the 10k. You had 3.926, so a little over 4% of shares out the float. Excuse me, short. And then of course the 10k hits. Mechanically speaking, I can see why. You see a loss in the fourth quarter. You see cash declining quarter over quarter. Now the Latest data through March 20 is 4.351 million, nearing 4.5% of the float as Robinhood calculated short. There's also no borrow, at least at Robinhood. So it doesn't cost you anything to short this thing, even though, you know, as we discussed, it's on a fundamental basis trading below 1 times EV to EBITDA. It doesn't cost anything to short. It's a deficient stock. It is a SaaS. I think it is getting just indiscriminately mechanically shorted to some extent. Okay, that's fine. That was a curiosity with GameStop that I don't think will ever be repeated where short interest was more than 100% of the float. But nonetheless it's something worth paying attention to because also it does affect the majority of the Minority math. Because remember, if you're lending out your shares, you cannot vote those shares. So it actually further reduces that denominator and therefore people who are voting it will increase the effect of their vote. So getting back to your question, what are people missing? Virginia, as I mentioned, sell side's not modeling it, not updating their models. I just have not seen anyone else actually do what I've gone through and size it. And if you go, just think that you have one of the largest states in the country that is bordered by multiple states who do not have legal adult use that is now going to have an adult use Cannabis framework. Effective January 21, retail sales start 350 retail licenses. No local opt out. Bear that in mind. It's not as though in certain states like California and New York, there's been reductions because localities can opt out. That is not allowed in the state of resources Virginia. So on a conservative basis, VA plus balance sheet cash exceeds the current market price. And when I say conservative, I mean using the prior bill that is smaller and using the most conservative swags. I'm not trying to be heroic in my sizing of Virginia. It is a wide range but nonetheless I converge using the methodologies around a material sizing for that state as an incremental benefit to the company. So before you assign any value to their existing 175 million revenue platform 5200ish paying clients, rescheduling Hemp Band or anything else cash plus Virginia gets you there to the current price. Beyond the current price, there's one. I think there are two. But the sell side analyst covering the stock, Casey Ryan at Westpark Capital, he has a 261 price target. The stock's at $0.63 spot. It's a 300% gap plus between the only fundamental analyst's assessment and the market price. And I don't put a lot of credence on sell side research. I 100% independently came up with my valuation. I saw his price target after I had done it and I just found it interesting that independently we were in the same ballpark. And when I see that gap, I see the legislative catalysts that no one's sizing. I see the governance pattern that the academic literature would recognize immediately. And I'm waiting on the governor's signature to publish some incremental research. That's why I've been adding to my position aggressively over the last few months. I've continued to add during the post 10k sell off that other holders are fleeing or short short sellers. Are entering and every single dollar of the analysis I've published is backed by my own capital.
- [59:14]
Podcast Host / Moderator
Okay, thank you Rod for joining the show. Once again. Before we get out of here and hit the disclosure, tell listeners where they can find more of your work, read your detailed analysis and all that good stuff.
- [59:26]
Rod Alsman
I know it's super creative. I'm on Twitter. I still call it that. I'll keep calling it that. Even though the platform deteriorated, it has network effects, baby. You know, I can't dispute that reality. They are very strong. Network effects are a real thing. Rod Alsman Odalsman is my handle there. Substack rodalsman.substack.com I have written up this company multiple times. All of my correspondence to the board is there and you are welcome to download it and disagree with it. Happy to hear your any feedback pertaining to the analysis. Look, I'm not doing this because I'm trying to pump the security. I have a view that the security is extraordinarily mispriced. I think that the math supports that view. I think that the operative realities the company is facing support that view. We'll see what happens. It might get spicy here in short order.
- [60:25]
Podcast Host / Moderator
Yes, we will see. If anyone wants to read more, I will have a direct link to the latest substack post in the show Notes but as a disclosure, we are not financial advisors. Anything we say on the show is not formal advice or recommendation. Ryan I are Any podcast guests may hold securities discussed in this podcast may have held them in the past. I may buy, sell or hold them in the future. Thank you again. Thank you once again, Rod for joining the show. Thank you to the listeners. Thank you to our sponsors, Interactive Brokers, Fiscal AI and more. And we'll see everyone next time.