The global podcast platform Audioboom is getting a $4 million cash infusion from Michael Tobin, the company's chairman, and Candy Ventures, the largest shareholder which currently holds 24% of the company. Audioboom says the money, from an entity they’ve named
SPV Investments Ltd., will be used to help accelerate its acquisition of established podcasts and production of its own shows as the company stakes out a bigger role in the content creation side of the business as a way to grow its advertising revenue.
Specifically, the funding will be used to provide minimum advertising revenue guarantees to new content partners as well as offer similar guarantees when existing partners’ contracts come up for renewal. The company tells shareholders that such revenue guarantees remain “very much an exception” when negotiating the terms of a deal with content providers, and are only used to secure “leading, high profile, high revenue producing podcasts.”
Audioboom has already put the money to use. It says it will use $1 million for a revenue guarantee for one of its most popular entertainment podcasts. It doesn’t reveal which, but it’s believed to be the And That’s Why We Drink podcast which signed a commercial agreement with Audioboom last September. The deal gives Audioboom exclusive sales and distribution rights for the show for 18 months, with the opportunity to work with the content partner on additional podcast projects. “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,” the company told investors. And That’s Why We Drink has been downloaded more than 22 million times.
In exchange for their investment, Tobin and Candy Ventures will receive 8% of the net advertising revenue from any podcast for which their money was used to provide a guarantee. They’ll also get warrants to buy up to 10 million shares of company stock exercisable during the next five years. An initial grant of 2.5 million warrants has been made, split equally between Tobin and Candy Ventures.
Rob Proctor, CEO of Audioboom, says it is a “huge vote of confidence” from the company’s largest shareholder and its “faith in Audioboom’s future.” The move also eliminates the need to do an equity offering that would dilute the company’s stock value for current shareholders. “I anticipate that the SPV’s guarantees will further allow us to acquire new top tier content, much of which is currently being negotiated,” said Proctor.
Earlier this month Audioboom announced it has raised $4.8 million in additional capital to also focus on growing content. And in the annual report, Tobin said the company is working on a new agreement with its lenders that would give it further means to expand its podcast portfolio.
Tobin became chairman of Audioboom’s board last September and he acknowledges the company had “significant challenges” in 2018. Those hurdles, he said,were created in large part by the “distraction and financial cost” of the aborted $185 million acquisition of Triton Digital after the company was unable to raise the money needed to complete the deal. But Proctor said in the annual statement to investors that Audioboom's growth trajectory has been “re-established” from that misstep, helped by the momentum of their business in the fourth quarter. It broke even in Q4 and the gains continued into the new year. In April Audioboom reported its first quarter revenue soared to $4.6 million, up 180% compared to a year earlier.
Audioboom also announced that it will ask shareholders to approve a plan at this year’s annual meeting for what’s essentially a reverse stock split. The move will consolidate 100 existing shares into one new share.