Folks who would like to delve into the marijuana market indirectly should consider Silver Spike Acquisition (NASDAQ:SSPK), which in December struck a merger deal with WM Holding Company. If the idea of investing in a cloud software provider for the cannabis industry sounds intriguing, then read on to learn more about SSPK stock.
Maybe you’ve never thought about adding a cannabis software-as-a-service (SaaS) company to your portfolio. Heck, the market for this type of business didn’t exist 20 years ago.
But then, we’re now living in a time when cultivators aren’t the only pot companies worth investing in. Plus, in the era of the novel-coronavirus pandemic, tech-focused firms are getting extra attention from investors.
So you’re invited to consider taking an indirect path to cannabis riches. I’ll start with a deep dive into the technical aspects of SSPK stock.
A Closer Look at SSPK Stock
Throughout most of 2020, SSPK stock clung very closely to the $10 level. This isn’t unusual for SPAC stocks when they’re in the pre-deal-announcement phase.
Surely it was frustrating to hold Silver Spike’s shares month after month as it went basically nowhere. On the other hand, those who had bought and held the shares were rewarded in December, when they rallied significantly.
On Dec. 10, SSPK stock surged as much as 23% in pre-market trading after its merger deal with WM Holding Company was announced. Impressively, the stock touched the $14 level on that day.
The bulls were pretty much unstoppable after that. By Jan. 20, Silver Spike had broken above $20, and on Jan. 21, the shares reached a stunning 52-week high of $26.60.
The share price of Silver Spike cooled off a bit after that, but the bulls are still generally propelling the share price higher. Their next target should be to breach the key $30 level and stay above it for the long-term.
The Lowdown on WM Holding Company
WM Holding Company’s stated purpose is to be “the leading technology and software infrastructure provider to the cannabis industry.”
For your convenience, here are a handful of fast facts about the company:
- WM Holding Company operates Weedmaps, an online listings marketplace for cannabis consumers and businesses.
- The company also runs WM Business, a comprehensive SaaS subscription offering that it markets to cannabis retailers and brands.
- One of WM Holding Company’s biggest selling points is that it only provides software and other technology solutions. Thus, the company doesn’t get directly involved with marijuana.
- WM Holding Company has grown its revenues at a truly stunning compound annual growth rate (CAGR) of 40% over the past five years.
- Moreover, the company is expected to have generated $160 million of revenue, along with $35 million of EBITDA, last year.
As you can probably tell, the CAGR stat really caught my attention. Given the company’s strong revenue growth rate, the jump of the SSPK stock price certainly seems justified.
Many Dispensaries Are Flocking to Weedmaps
Weedmaps isn’t just a cool name for an online weed marketplace. It’s also a brilliant idea for a business.
Already many dispensaries are flocking to Weedmaps. The company’s clients, believe it or not, include 55% of the retail licensees throughout the markets where Weedmaps operates.
Plus, Weedmaps is collecting hefty fees from these clients, as it charges approximately $3,000 per month per retailer. But the clients get a sizable range of services for those fees.
For instance, Weedmaps’ clients receive access to a “Business-in-a-Box” package which includes a listing page, an inventory-and-price management system, and fulfillment services, as well as a place in the Weedmaps store.
Moreover, Weedmaps’ clients potentially get access to over 10 million monthly active users, distributed across nine countries, on the propriety Weedmaps marketplace.
So Weedmaps seems to offer strong value. And it’s apparent that its customers are ready and willing to pay a high premium for it.
The Bottom Line
Hopefully, I’ve turned you on to the idea of investing in a dominant player in the niche cannabis SaaS market.
It’s astounding to consider the idea of investing in a cannabis company that doesn’t get involved with marijuana. SSPK stock, however, makes that entirely possible.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.