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Why Silver Spike Acquisition Soared More Than 30% Today

By Howard Smith - Updated Dec 10, 2020 at 12:26PM

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The SPAC just announced its plan to bring a cannabis company public.

What happened

Shares of special purpose acquisition company (SPAC) Silver Spike Acquisition (SSPK) rocketed up almost 50% Thursday, remaining up 34% as of 1 p.m. EST. 

So what

The SPAC announced it was going to bring cannabis technology platform company WM Holding Company (WMH) public through a merger that will allow it to trade on the Nasdaq stock exchange. WMH operates Weedmaps, an online listings marketplace for cannabis consumers.

Flag with marijuana leaf and green and white stripes against a clear sky background

Image source: Getty Images.

WMH also provides software infrastructure to the cannabis industry through its software-as-a-service (SaaS) subscription business for retailers and brands. WMH was founded in 2008, and the company says it has been "a driving force behind much of the legislative change we've seen in the past 10 years."

Now what

After the combination with Silver Spike, the company will be valued at approximately $1.5 billion. WMH is expected to have $160 million in revenue in 2020, according to the merger announcement. Over the last five years, sales have increased at a compound annual growth rate (CAGR) of 40%. 

The company's Weedmaps marketplace has over 10 million monthly active users and more than 18,000 business listings in U.S. states where there is a legal cannabis market. 

The company believes the cannabis market in the U.S. is likely to double over the next five years. If that comes to fruition, investors in WMH should do well as the company would be a leading supporter to that growth. But government regulation is hard to assess, and investors should consider it speculative and at the very least be prepared for a longer road to legalization than some predict. 

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