Audioboom agrees $4m funding facility for top podcasts
Audioboom, the global podcast firm, has agreed a new content funding facility with SPV Investments Ltd for up to $4m.
A special purpose vehicle has been established and is owned equally by Michael Tobin, the company's Chairman, and Candy Ventures, the company's largest shareholder.
The SPV will provide minimum revenue guarantees to certain leading new content partners of the company.
In addition, the SPV will provide minimum revenue guarantees to certain leading existing Audioboom content partners when these contracts are being renewed.
The SPV will provide guarantees of up to US$4 million in aggregate, to secure the minimum guaranteed advertising revenue share payable to the content partners pursuant to their commercial agreements with Audioboom.
The provision of guarantees remains very much an exception when negotiating terms with content partners and the guarantees from the SPV will be used only to secure leading, high profile, high revenue producing podcasts.
The use of third-party guarantees will allow Audioboom to sign and renew certain leading podcast talent without tying up working capital.
In return, Audioboom will pay the SPV 8% of the net advertising revenue (after paying the content partner its share) received by Audioboom from podcasts for which the guarantee has been provided.
In addition, the underlying providers of the guarantees will be granted 2.5 million warrants to subscribe for ordinary shares in the company for every US$1 million of guarantee provided, subject to a maximum of 10 million warrants.
The exercise price of these warrants will be 3.3p per share each, with such warrants being exercisable for five years from grant.
Initial use of the facility
The first use of the SPV will be for a guarantee of US$1 million in relation to the renewal of one of Audioboom's most popular entertainment podcasts.
Audioboom has renewed an exclusive sales and distribution contract with this show for 18 months with the opportunity to work with the content partner on further podcast projects together.
Since launching with Audioboom this podcast has been downloaded more than 20 million times. In Q1 2019, Audioboom sold 100% of its available advertising inventory against this podcast and the Directors believe that the new deal will more than double the inventory that the Group can sell on this content.
This first guarantee provided by the SPV leads to an initial grant of an aggregate of 2.5 million warrants split equally between Michael Tobin and Candy Ventures sarl.
Audioboom is currently in negotiations in respect of the acquisition of further new top tier content and it is anticipated that more renewals and new podcasts with established, leading podcast talent will be secured using the guarantee facility and announced in the future.
Rob Proctor, CEO of Audioboom, commented: "Notwithstanding the considerable revenue growth that Audioboom is currently enjoying and - most importantly - improved cash flow position, we are delighted that this guarantee facility has been put in place, reflecting a huge vote of confidence from our Chairman and our largest shareholder, Candy Ventures.
“I am delighted that the first use of the guarantee from the SPV is for the renewal of one of our most popular podcasts. I anticipate that the SPV's guarantees will further allow us to acquire new top tier content, much of which is currently being negotiated.
“I look forward to the company making further announcements when these deals have completed.
“The warrants issued to the guarantors are currently significantly 'out of the money', which further demonstrates our Chairman and largest shareholder's faith in Audioboom's future.
"This structure means minimal dilution to shareholders compared to an equity raise at current share price levels, yet provides Audioboom with US$4 million of firepower to access new content that will appeal to our ever growing roster of advertisers.
“PWC recently forecast that podcast advertising in the US alone will reach US$1 billion in 2021. Given the continued investment in the sector and consolidation of key players by multi-national media companies, I am very excited about the future for Audioboom, and its shareholders."