A new complaint was filed against WM Technology by shareholder (plaintiff) Seret Ishak on October 17, 2024, in the U.S. District Court of the Central District of California. The Defendants in the complaint are the company and eight other individual defendants, including CEO Douglas Francis. The plaintiff alleges that he bought MAPS stock at artificially inflated prices between May 25, 2021 and September 24, 2024 (Class Period) and is now seeking compensation for the financial losses. To learn more about the lawsuit click here.
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WM Technology operates an online marketplace for the cannabis industry. The company’s Weedmaps for Business platform allows businesses to market, advertise, and sell their products online. It also has an online consumer marketplace and apps for weed products, where consumers can educate and order cannabis products online.
The filed complaint states that the defendants misled WM Technology investors in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, during the Class Period.
Plaintiff’s Allegations
According to the complaint, WM Technology intentionally manipulated its financial statements, especially its MAUs (monthly active users) and the number of clients, to indicate a flourishing business and the popularity of its website.
What’s worse, the defendants allegedly certified the accounts in their respective capacities, resulting in a failure to exercise proper oversight and control over the reported financial numbers.
WM Technology’s Misrepresentations
The truth started becoming clear in August 2022, when WM filed documents with the SEC, which revealed that an internal whistleblower called out WM’s incorrect methodology of counting its MAUs. The whistleblower alleged that WM knowingly inflated its MAUs and number of clients to draw a rosy picture of the company’s business prospects to the investors. WM Technology also filed a report with the SEC mentioning the whistleblower claims.
The information became crystal clear on September 24, 2024, when the SEC issued litigation against WM Technology and some of the defendants for making grave misrepresentations about MAUs and clients in the publicly available filings. The SEC also noted that WM Technology agreed to pay a civil fine of $1.5 million in relation to the litigation. Following the news, MAPS shares fell nearly 2%.
To conclude, the defendants allegedly overstated the financial metrics of the company, inducing shareholders to buy the stock. Fortunately for WM Technology, the company reported in-line earnings per share of $0.03 for Q3FY24, while its revenues declined slightly year-over-year to $46.6 million. MAPS shares jumped 19.5% on the news yesterday.
Overall, MAPS shares have plunged 22.20% in the past six months, causing massive damage to shareholder returns.
