Global media and marketing company Crowd Media Holdings Limited (ASX: CM8) has executed a binding Heads of Agreement (HOA) with IIC to fund existing company requirements and develop new business synergies and joint ventures between Crowd and businesses that IIC can introduce and facilitate.
After spending considerable time reviewing the Crowd Media platform, the Consortium has recognised major opportunities to leverage Crowd Media’s knowhow and proprietary technology into channels, new geographies, and earnings stream. The Consortium includes Bjoern Keune and Gennadi Tschernow, the co-founders of Invincible Brands. It is expected that the deal will result in Crowd entering into JVs that will complement businesses and brands already linked with IIC. The Invincible Brands’ marketing platform reaches over 100 million people every month on social media.
Details of Agreement
As per the company’s announcement, the European investment consortium has agreed to invest up to $3.7 million into the company across two tranches. Under the first tranche, a $1.7 million twenty-month facility will be drawn down by 31/08/2019 with a fixed conversion price of 1.8 cents and Under the second tranche, a $2.0 million twenty-four-month facility will be drawn down in ninety days with a fixed conversion price of 2.0 cents. Both the Convertible notes come with a 1:1 attaching option upon conversion, and the options exercisable at 3 cents with a 24- month term.
The second tranche is subject to the parties agreeing to a business plan, which focusses on the following key objectives:
- IIC introducing products and/or businesses to Crowd (company) that will leverage the company’s proprietary technology and knowhow. This will allow those products and/or businesses to be promoted and marketed through the digital marketing platforms and distribution channels of Crowd Media;
- IIC introducing strategic business opportunities to Crowd (such as exclusive marketing and joint venture arrangements) to market its associated products in identified new countries/regions including Scandinavia, Benelux, Eastern Europe, Asia and Australia; and
- Leverage the strengths, intellectual property and know-how of each party, noting that Crowd’s strengths include its proprietary technology (currently only utilised in its Q&A and Subscription verticals), social media and digital marketing; IIC’s strengths include innovative product development, brand-building, international business operations, brand positioning and digital media influencer marketing.
Use of Funds
The funds from the Tranche 1 will be used to pay down the convertible notes issued to Obsidian, cover redundancy costs forming part of the previously announced organisational restructuring, and provide additional general working capital.
The Tranche 2 funds will mostly be used for the proposed joint venture, partnership or any other corporate activity as identified in the business plan.
With improved balance sheet and cash flows, Crowd Media believes that it is now well positioned to capitalise on a number of existing and new opportunities. Additionally, the investment brings with it the decision-making band width of the consortium, which collectively has been involved in several enormously successful businesses.
Board Changes & CEO Remuneration
As per the terms of the Agreement, Invincible Investment Consortium principals Steven Schapera and Robert Quandt will be joining Crowd Media’s Board in September 2019. Both Steven and Robert are key contributors to the investment consortium with proven track record that will greatly help the company with both its current operations and new opportunities.
Steven Schapera will replace Theo Hnarakis as the new Chairman, as Mr. Hnarakis will be retiring from the company’s Board.
While commenting on this, the incoming Chairman Steven Schapera highlighted that Crowd Media has recently completed a substantial restructure; appropriately, it is now far leaner and more nimble, placing it well to capitalise on its existing business streams. He also highlighted that the company’s proprietary technology platforms and knowhow have untapped potential.
As part of the incoming investment by IIC, current CEO Domenic Carosa has agreed to reduce his remuneration package, beginning 1st September 2019 to €240k per annum with an agreed 3-month notice period.
Crowd Media Holdings Overview
Global media and marketing company, Crowd Media Holdings Limited mainly operates two divisions:
- Digital Marketing Division (Media) – This division works hand in hand with brands and digital influencers to deliver branded content to the massive and fast-growing millennial and Generation Z market;
- Mobile division– This division produces content like apps, games and music;
The company has not yet revealed its FY19 results but have made some estimates for both of its divisions. For media division, the company has estimated revenues of around $1.7 million for FY19 and for media division, it has estimated revenues of around $23 million.
- Inked two initial insertion orders with Elixinol to help the latter, a Cannabis Hemp CBD Oil company, in boosting its customer base with new customer additions for its Organic Hemp Oil products.
- Crowd Media Appointed Ms Laura Newell as Company Secretary;
- Crowd Media commenced implementation of streamlining and cost reduction initiatives; expecting positive EBITDA and positive operating cashflow in FY2020;
- Executed new 3rd party agreements for digital marketing services including digital influencer marketing for multiple international brands;
- Executed a pilot agreement with Moneyfarm, one of the largest digital wealth companies in Europe, reflecting the shifting focus of Crowd Media to the large and growing digital influencer and social media marketing sector;
- The company entered into a Convertible Securities Agreement with Obsidian Global Partners, LLC (Investor);
- Launched a new media kit to reflect the shifting focus of Crowd Media to the large and growing digital influencer and social media marketing sector;
The shares of Crowd Media Holdings Limited went up by 15% during the intraday trade on 29 August 2019, influenced by the news of strategic investment & partnership with Invincible Investment Consortium (IIC).
At market close on 30 August 2019, CM8’s stock was trading at a price of $0.021 with a market capitalisation of $5.48 million.
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