On any given day, nearly half a million people in the U.S. will find themselves in various stages of incarceration for drug-related offenses. Perhaps more than other statistics, this particular estimate — provided by the Prison Policy Initiative — reflects the urgency in both criminal justice reform and the federal de-scheduling of cannabis.
Indeed, the matter has become incredibly pronounced in the federal prison system. According to the Urban Institute, the Federal Bureau of Prisons represents “by far the nation’s single largest jailer, with a total of 205,795 inmates at the beginning of October 2015. That’s roughly 50,000 more people in custody than in the second-largest prison jurisdiction, Texas.”
During the 2016 electoral campaign, many presidential hopefuls decried “the number of incarcerated people who have been convicted of low-level, nonviolent drug crimes, arguing that our nation would be better served by investments in public health initiatives and preventive policies such as education and job creation.”
To be fair, releasing all nonviolent drug offenders would not by itself alleviate the mass incarceration dilemma that plagues the nation, as “4 out of 5 people in prison or jail are locked up for something other than a drug offense.” Still, decriminalization of cannabis would be a significant step for companies like Leafly Holdings Inc.
What is Leafly?
Launched in 2010, Leafly is essentially an online marketplace for the cannabis market, facilitating connections between botanical consumers and licensed dispensaries. Primarily, the company generates sales through monthly subscription service fees that enable cannabis retailers to be listed on the Leafly website and to have access to its e-commerce tools. Per a corporate disclosure, Leafly attracts 125 million visitors annually.
Not surprisingly, the platform is the go-to arena for cannabis retailers, with over 4,600 businesses featuring a presence on the Leafly website. Both botanical abecedarians and connoisseurs alike continue to flock to the brand, not only for its retail connections but also for the unparalleled wealth of educational content. From political developments to detailed breakdowns of various cannabis strains, Leafly is truly the “green” sector’s one-stop shop.
When is the Leafly IPO Date?
Following a blistering surge in new listings last year, this year is getting off to a relatively slow but steady start. For Leafly, the cannabis specialist’s initial public offering (IPO) is scheduled for Feb. 7, 2022. However, since the firm will merge with Merida Merger Corp. I (NASDAQ: MCMJ), a special purpose acquisition company (SPAC), the process is different from a traditional market debut.
Under a bread-and-butter IPO, a private enterprise will release its shares to public (retail) investors, typically through the help of financial underwriters. With a SPAC merger, it’s the shell company that launches an IPO to help fund a business combination with a viable organization. Should the SPAC’s shareholders approve the merger, the two entities become one, with the target providing the business while the shell company provides a backdoor entrance to the capital market.
On Feb. 4, Leafly and Merida announced the closing of their business combination. Per Leafly CEO Yoko Miyashita, “Backed by substantial funding, tremendous advancements in cannabis legalization and e-commerce tailwinds, we are relentlessly focused on investing in our technology, talent and content to execute our growth strategy and create value for all stakeholders.”
Shares of Leafly will trade on the Nasdaq exchange under the ticker symbol LFLY.
While any time a formerly private company enters the IPO calendar presents risk because of myriad unknown variables, Leafly enjoys certain advantages that businesses from other sectors lack. Mainly, “Americans overwhelmingly say marijuana should be legal for recreational or medical use,” per a Pew Research Center report.
Those who are or lean Republican tend to be conspicuously more opposed to legalization initiatives than Democrats. However, this dynamic may be more of a function of age, with the 75-plus demographic most opposed to full legalization of marijuana. Thus, in the years ahead, investments like LFLY stock could benefit from sentiment-based tailwinds.
As a segue, then-presidential candidate Joe Biden expressed support for decriminalizing marijuana during the 2020 electoral campaign trail. Though he has consistently stopped short of calling for the much-maligned plant’s legalization, it’s possible this tune may change. With his approval rating sliding between both sides of the political aisle, Biden might need to do something drastic.
Nevertheless, prospective buyers of LFLY stock will want to exercise great caution. With the Federal Reserve signaling a future tightening of the money supply, investors don’t have much confidence in risk-on companies like Leafly.
Leafly Financial History
On paper, the legal cannabis industry should easily be a no-brainer investment category. At its core, the sector represents a transition from a black-market enterprise — as in not taxable — to one that is legitimate and therefore, taxable. To be fair, the Internal Revenue Service (IRS) requires taxpayers to report nefarious sources of income, such as bribes and illegal activities. However, compliance is likely lacking.
Despite the green light for green endeavors, North American cannabis stocks have not enjoyed the easiest ride. For instance, in 2018, Canada became the first G7 member state to legalize marijuana. Though this breakthrough had positive implications for the underlying sector, an oversaturated market and a government unable to handle the deluge of cannabis licensing applications stifled a promising industry.
Closer to home, the legal vagaries between permissive laws in various states and the federal government’s Schedule I classification — the most severe controlled substances rating — for cannabis frankly puts off would-be institutional investors. Irrespective of these challenges, though, Leafly has admirably pressed on, with expectations calling for revenue to hit $43 million in 2021 and $65 million in 2022.
Though encouraging, the financials are where reality might rudely meet fantasy. According to data compiled by Crunchbase.com, Leafly raised a relatively modest $40.8 million across three private-equity funding rounds. Such a figure shows that many institutional players are concerned about continuing legal ambiguities regarding the cannabis sector.
True, the Democrats currently control the executive and legislative branches, meaning they could push for marijuana reform, thus benefiting LFLY stock. However, as the Brookings Institute reported, President Biden has been slow to embrace such reform.
With younger voters playing a greater role in the electoral process, it’s possible that they could shift the broader narrative in favor of full marijuana legalization. Beyond the 2024 election, future presidential candidates will likely hail from younger age brackets, who may then be more sympathetic to concerns about personal adult liberties.
But the question is, can LFLY stock stay afloat that long for the political catalyst to matter?
Right before Leafly enters the public market under its own ticker symbol, Merida Merger shares dropped to $6.53. This selloff translated to a nearly 35% hemorrhaging on a year-to-date basis, implying that many MCMJ stakeholders redeemed their shares rather than move through with the proposed merger. Following the sharp correction, Merida had a market capitalization of $97.8 million.
On one hand, risk-tolerant speculators could see LFLY stock as a discounted opportunity. Leafly commands a strong audience in the cannabis enthusiast market. However, competition in the botanical space is also fierce, presenting significant concerns.
Finally, it must be pointed out that SPACs post-business combination have grossly underperformed benchmark indices. While you must judge each opportunity by its own merits, this form of IPO has failed to satisfy most investors.
How to Buy Leafly IPO (LFLY) Stock
Those interested in Leafly must acquire shares at the open, necessitating knowing how to buy stocks. Below is a quick guide.
Step 1: Pick a brokerage.
With the best brokers competing on similar incentives, focus your efforts on finding the platform that ideally suits your needs.
Step 2: Decide how many shares you want.
All IPOs are risky, especially those related to the cannabis sector. Therefore, choose a balanced share count.
Step 3: Choose your order type.
Before trading, learn these market concepts.
- Bid: The buyer’s best offer for a stock.
- Ask: The seller’s lowest acceptable price.
- Spread: The difference between the bid-ask price, the spread indicates market risk as this is also the profit margin for market makers.
- Limit order: Buy or sell requests at a predetermined price, limit orders provide transparency but no execution guarantees.
- Market order: Market orders guarantee fulfillment but only at the current rate.
- Stop-loss order: Stop-loss orders automatically exit your position at either a predetermined price or anything lower.
- Stop-limit order: Stop-limit orders only leave positions at a specified price, but they also carry non-fulfillment risks.
Step 4: Execute your trade.
Follow these steps to execute a market order:
- Select your action type (buy or sell).
- Enter the shares you want to acquire (or sell).
- Hit the Buy (or Sell) button.
Follow the same sequence for limit orders (but include your execution price).
LFLY Restrictions for Retail Investors
Review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons before participating in an IPO. Don’t engage if you have privileged information.
Unfortunately, no pre-IPO opportunity is available for LFLY stock. However, those interested in new listings should open an account with Freedom Finance.
Bud or Dud?
On the surface, cannabis legalization appears to present a win-win proposal, delivering greater tax revenue for the government while keeping individuals out of the correctional system and hopefully into economically productive pursuits. However, the actual framework is much more convoluted, presenting a vexing circumstance for LFLY stock.
Frequently Asked Questions
Who owns Leafly?
Leafly is owned by Privateer holdings.