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Audioboom agrees $4m special purpose vehicle to secure 'top talent'

By Josh White

Date: Monday 17 Jun 2019

Audioboom agrees $4m special purpose vehicle to secure 'top talent'

(Sharecast News) - Podcast production and distribution company Audioboom has agreed a new content funding facility with SPV Investments - a special purpose vehicle (SPV) which has been established and is owned equally by Michael Tobin, the company's chairman, and Candy Ventures, the firm's largest shareholder, it announced on Monday.
The AIM-traded company said the SPV would provide minimum revenue guarantees to certain leading new content partners of the firm.

In addition, the SPV would provide minimum revenue guarantees to certain leading existing Audioboom content partners when those contracts were being renewed.

The SPV would provide guarantees of up to $4m in aggregate, to secure the minimum guaranteed advertising revenue share payable to the content partners under their commercial agreements with Audioboom.

Audioboom said the provision of guarantees remained "very much an exception" when negotiating terms with content partners, with the guarantees from the SPV to be used only to secure "leading, high profile, high revenue producing" podcasts.

The firm said the use of third-party guarantees would allow it to sign and renew certain leading podcast talent without tying up working capital.

In return, Audioboom would 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 had been provided.

Additionally, the underlying providers of the guarantees would be granted 2.5 million warrants to subscribe for ordinary shares in the company for every $1m of guarantee provided, subject to a maximum of 10 million warrants.

The exercise price of those warrants would be 3.3p per share each, with such warrants being exercisable for five years from grant.

Audioboom said the first use of the SPV would be for a guarantee of $1m in relation to the renewal of one of its most popular entertainment podcasts, which it did not name.

The company said it had renewed an exclusive sales and distribution contract with the show for 18 months, with the opportunity to work with the content partner on further podcast projects together.

Since launching with Audioboom, the podcast had been downloaded more than 20 million times.

In the first quarter of 2019, Audioboom sold 100% of its available advertising inventory against the podcast, with the directors saying they believed that the new deal would "more than double" the inventory that the group could sell on the content.

The first guarantee provided by the SPV lead to an initial grant of an aggregate of 2.5 million warrants, split equally between Michael Tobin and Candy Ventures.

Audioboom said it was currently in negotiations in respect of the acquisition of further new top tier content, and it anticipated that more renewals and new podcasts with "established, leading podcast talent" would be secured using the guarantee facility, and announced in the future.

"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," said Audioboom chief executive officer Rob Proctor.

"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."

Proctor said that the warrants issued to the guarantors were currently significantly 'out of the money', which he said further demonstrated the chairman and largest shareholder's faith in Audioboom's future.

The structure meant minimal dilution to shareholders compared to an equity raise at current share price levels, the CEO explained, yet provided Audioboom with $4m of firepower to access new content that would appeal to its growing roster of advertisers.

"PwC recently forecast that podcast advertising in the US alone will reach $1bn in 2021," Rob Proctor said.

"Given the continued investment in the sector and consolidation of key players by multinational media companies, I am very excited about the future for Audioboom, and its shareholders."

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