8-K: WM Technology Co-Founders Propose Take-Private Deal at $1.70 Per Share

WM Technology's co-founders have submitted a non-binding proposal to acquire all outstanding shares they don't already own for $1.70 per share, leading to the formation of a special committee to review the offer.

Summary

• WM Technology has received a non-binding proposal from its co-founders, Doug Francis and Justin Hartfield, to take the company private.
• The co-founders are offering $1.70 per share in cash for all outstanding common stock they do not currently own.
• This offer represents a 39% premium to the closing price on December 17, 2024, a 52% premium to the implied Enterprise Value, and a 65% premium to the volume-weighted average price (VWAP) over the last year.
• The co-founders currently own approximately 32% of the company's outstanding shares and plan to roll their equity into the transaction.
• A special committee of independent directors has been formed to review the proposal, with Evercore Group L.L.C. and Allen Overy Shearman Sterling US LLP acting as financial and legal advisors, respectively.
• The proposal is subject to approval by the special committee, the full board, and a majority of the shares not being rolled into the transaction.
• The co-founders have secured proposals from financing partners and are confident in securing the necessary debt and equity financing.
• The co-founders anticipate executing a definitive agreement within 3-4 weeks.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive due to the significant premium offered to shareholders, but there is uncertainty surrounding the completion of the deal and the company's future.

Positives

• The proposed transaction offers a significant premium to the current trading price, providing immediate liquidity and certainty of value for public stockholders.
• The co-founders are committed to securing fully-committed financing, making the transaction not contingent on financing.
• The special committee of independent directors is in place to ensure the best interests of all stockholders are considered.
• The co-founders have engaged experienced financial and legal advisors to assist with the transaction.
• The co-founders' deep understanding of the company and the industry could lead to a more efficient and successful transition to private ownership.

Negatives

• The proposal is non-binding, and there is no guarantee that a definitive agreement will be reached or that the transaction will be completed.
• The company is facing significant headwinds, including declining licensed end-markets and increased competition.
• The tax receivable agreement (TRA) payment, estimated to be over $100 million, could deter other potential buyers.
• The company's future as a public entity is uncertain given the take-private proposal.

Risks

• There is a risk that the special committee may not approve the proposal or that the full board may not recommend it.
• The transaction is subject to a majority vote of the shares not being rolled into the transaction, which could be a hurdle.
• The company's performance could decline further if the transaction is not completed, impacting shareholder value.
• The company faces risks from the consolidation of cannabis retailers and brands and increased competition from traditional technology providers.
• There is a risk that the financing may not be secured on the terms expected by the co-founders.

Future Outlook

The company does not intend to comment on or disclose further developments regarding the special committee's consideration of the proposal unless and until it deems further disclosure is appropriate or required. The co-founders expect to execute a definitive agreement in 3-4 weeks.

Management Comments

• The co-founders believe the proposed transaction is in the best interests of WM stockholders and all stakeholders.
• The co-founders stated that their proposal presents a value-maximizing alternative to WM's current strategic trajectory.
• The co-founders believe the proposal provides an opportunity to de-risk their investment.
• The co-founders are deeply passionate about the company and the licensed cannabis industry.
• The co-founders stated that they have received proposals from potential financing partners and are highly confident in securing the necessary financing.

Industry Context

The proposed take-private deal comes at a time when the cannabis industry is facing headwinds, including declining end-markets and increased competition. This move could be a strategic response to these challenges, allowing the company to operate more flexibly outside the scrutiny of public markets.

Comparison to Industry Standards

• The proposed premium of 39% to the closing price is significant, suggesting a strong desire by the co-founders to take the company private.
• The 52% premium to the implied Enterprise Value is also substantial, indicating that the co-founders believe the company is undervalued by the market.
• The 65% premium to the VWAP over the last year further highlights the attractiveness of the offer to shareholders.
• Comparable take-private transactions in the technology sector often involve premiums in the range of 20-40%, making this offer relatively high.
• The involvement of Evercore Group L.L.C. and Allen Overy Shearman Sterling US LLP as advisors is typical for transactions of this size and complexity, indicating a professional approach to the process.

Stakeholder Impact

• Shareholders could benefit from the premium offered in the take-private proposal.
• Employees may experience changes in the company's structure and operations if the transaction is completed.
• Customers and suppliers may not be significantly impacted in the short term, but long-term changes could occur under private ownership.
• Creditors may be impacted by the financing structure of the transaction.

Next Steps

• The special committee will review the proposal with the assistance of its financial and legal advisors.
• The co-founders will work to secure fully-committed financing for the transaction.
• The parties will negotiate a definitive merger agreement.
• The transaction will be subject to approval by the special committee, the full board, and a majority of the shares not being rolled into the transaction.

Key Dates

Keywords

take-private, acquisition, cannabis, WM Technology, Weedmaps, Doug Francis, Justin Hartfield, special committee, merger, premium