- Crowd’s mission has been to sell exemplary products that are integral to the lives of its millennial audience
- As per the Company, it is the world’s only listed social commerce business leveraging social influencers internationally
- Underpinned by strong underlying technology, an impressive financial turnaround, new Board, vision & strategy, tapping fast growing influencer market and with digital marketing expertise, Crowd has been garnering ample market attention and has recently raised funds to bolster its stance further
In a situational update to shareholders dated 23 June 2020, Crowd Media Holdings Limited’s (ASX:CM8) Chairman, Steven Schapera, acknowledged that the global media and marketing company is in a reasonable position to assess where it has been, where it currently is and where it is headed. This can be primarily owed to a Board of seasoned entrepreneurs, a positive and steadily improving underlying EBITDA, new D2C launches, over-arching strategy coupled with agile execution and the most recent factor- a successful capital raising.
Crowd’s Heavily Subscribed Placement
In a strategic move to reduce debt, increase working capital, improve shareholder register and fetch attention to the stock, Crowd has successfully raised $ 1.5 million via placement of 62,210,000 ordinary shares at 2.5 cps and 31,105,000 Options (subject to shareholder approval at upcoming EGM) with an exercise price of 4 cents with 2-year expiry from issue.
The offer was significantly over-subscribed, aiding the Crowd to select only those who are best aligned with its interests. 180 Markets, Australia's newest Equity Placement platform along with Peak Asset Management were co-lead managers to this Placement.
Settlement of the Placement is likely to occur on 25 June 2020 with probability of new shares under it to be issued the next day, 26 June 2020. The Company will apply for quotation of the new shares on ASX that will rank equally with existing Crowd shares.
Proceeds of the Placement will be used to bolster Crowd’s balance sheet, reinforce sales, hasten scale up and reduce the Billfront debt facility.
Proceeds Potentially Lowering Crowd’s Risks?
Crowd’s Board of seasoned entrepreneurs is known to always assess risk particularly in the short and medium term.
Proceeds from the placement are likely to lower the Billfront debt facility by up to $ 500 k. An identified risk, the Board deemed fit to reduce the Company’s exposure by about $ 500 k, to a more comfortable level around $ 1.65 million outstanding.
Another lingering risk is that capital markets may possibly become more stringent to access later in the year. The company may leverage the placement proceeds, if requirement arises. It should be noted that the pace at which Crowd can hasten scale-up and reinforce sales is largely decided by working capital, and the capital raising can well support it.
After the capital raising notice, Chairman Stephen Schapera shared the latest situational update with Shareholders whom he considers to be “the Owners of the Company”
Crowd’s Impressive Financial Turnaround
The Company’s financial turnaround commenced last year in September post a sizeable investment by a consortium led by Mr Schapera and co-director Robert Quandt. Owing to CEO Domenic Carosa and his management team’s efficiency, Mr Quandt’s vast consulting and operational background, the business was realigned and today is more agile, capable, and efficient despite operating upon a substantially lower cost base.
Positive underlying EBITDA results since January 2020 till June 2020 prove the Company’s stance considerably, making breakeven/near breakeven underlying EBITDA position seem achievable for FY20- the Board’s goal.
To know about Crowd’s impressive financial turnaround across month, READ HERE- How Crowd Media Accomplished Significant Financial Turnaround Across Months?
New Brands in Crowd’s Kitty
Mr Schapera believes that the financial turnaround been accentuated by Management’s focus on the quality of revenue, cost efficiency, and agility from top to bottom.
This agility has bagged three new brands testing on the Company’s sales platform in merely three months, (with additional six likely in the subsequent twelve months!). The three brands are- London Labs, I Am Kamu, and KINN Living.
Test sales to date with I Am Kamu and London Labs remain in line with expectations. KINN was recently launched and is performing slightly better than expectation. Before June 2020 ends, Crowd aims to test-launch London Labs as well as KINN on its recently built Amazon ecommerce platform, which if successful, can widen revenue-earning potential appreciably.
A recent attractive addition has been Crowd’s agreement to market and distribute brands from the portfolio of the UK’s esteemed VITAL Group, which has products under healthcare, consumer, and water purification sectors. The Agreement has been inked at a time when hygiene, health products, and home-care are extremely fundamental to the lives of Crowd’s customers, thanks to the COVID-19 pandemic. VITAL's Super Safe brand has solutions for virus testing and protection- making it highly lucrative currently.
Mr Schapera states that shareholders can expect to see Crowd bolster revenues from VITAL products, especially from those in the health/wellness space.
Increase in Influencer Marketing Spend
In May, Crowd gradually increased its influencer marketing spend. The initial phase is a series of tests-
- test to determine the influencer(s) best matched to the brand or product
- test to determine the message that produces the best response
- test repetition to ensure that consumers often don't take action until they have seen the message 3 or 4 times
This test-phase is an iterative process, and sales are slow-but-steady build in nature, if done right. Crowd paces it’s spend accordingly, and it can take 3 months (or even 6 for specialised products where a ”secret sauce” is a must) for results to show.
The Company has been reaping gains of an over-arching strategy which included removing unprofitable customers, enhancing efficiency, and discovering new opportunities and coalitions that could be profitably deployed. Crowd has also been justifying its mission to sell exemplary products that are integral to the lives of its millennial audience, and even though the focus was on beauty/haircare/skincare products which was hindered by the pandemic, the new brands have continued to target millennials- Crowd’s top priority.
In the words of Mr Schapera-
CM8 quoted $ 0.028 on 23 June 2020 and in the past three months, the stock has doubled in value.
(Note: All currency in AUD unless otherwise specified)