Stingray Digital Industry Consolidator

1. The story and the fundamentals:

August 8, 2018:

Stingray founder and chief executive Eric Boyko have positioned the company as an active industry consolidator since it went public in 2015 by making six acquisitions in the past year alone, (including Qello Concerts, Satellite Music Australia Pty. Ltd. (SMA) and SBA Music Pty. Ltd. (SBA)).  The recent purchase of Newfoundland Capital Corp. Ltd., (NCC), Canada’s second-biggest private radio broadcaster, will give Stingray 101 radio licences stretching across Canada, including 82 FM and 19 AM stations, and operates 72 local and 29 repeating stations.  NCC has generated a 37-per-cent margin on EBITDA over the past two years as well as pumping out $170-million in advertising revenue annually.  This expansion into radio would make Stingray Canada’s largest public independent media company and the country’s biggest multi-platform music provider.

Stingray buys licences to songs and then charges a fee for selling the music as preprogrammed packages to cable providers, satellite operators and other broadcasters. It usually gets paid a fee for every subscriber and also has a subscriber based unit that sells customized music for commercial clients including Subway and Fairmont Hotels.

On Aug. 3, 2018, the corporation announced that it has made an unsolicited offer to purchase all of the issued and outstanding units of Music Choice, a general partnership that produces music programming and music-related content for digital cable television, mobile phone and cable modem users. The offer at a purchase price of $120-million (U.S.), which remains open for acceptance until Aug. 31, 2018, has not yet been accepted and is currently under review by the unitholders.

On Aug. 1, 2018, the corporation announced that it has acquired Novramedia, a Toronto-based leader in the design, development and implementation of digital media solutions.

On May 14, 2018, the corporation announced that it had been selected by Talpa Media, creator of The Voice, to develop, publish and market around the world the juggernaut of singing competitions’ new companion singing app. The Voice singing app will be launched worldwide in December 2018.

On May 29, 2018, the corporation announced that it had reached a long-term agreement with Bell that renews and expands their long-standing relationship. Bell thus becomes the first Canadian operator that can offer its subscribers Stingray’s entire music and video services portfolio.

On June 19, 2018, the corporation announced that it has acquired a minority stake in Nextologies Ltd., an Ontario-based provider of technological solutions for broadcasters.

Noted is that Stingray pays a dividend of six cents per subordinate voting share.

2.  Financings:

May 02, 2018:  Treasury offering of 7,981,000 subscription receipts of the corporation, on a bought deal basis, at a price of $10.40 per public subscription receipt for gross proceeds of $83-million. Concurrently with the closing of the public offering, the corporation has issued from treasury 3,846,100 subscription receipts at a price of $10.40 per private placement subscription receipt for gross proceeds of $40-million. As a result of the public offering and concurrent private placement, a holder of multiple voting shares of the corporation has exercised subscription rights attached to the multiple voting shares of the corporation, and, consequently, the corporation issued from treasury 1,452,850 subscription receipts at a price of $10.40 for gross proceeds of $15-million. The syndicate of underwriters for the Offering was led by National Bank, BMO, CIBC, GMP, Desjardins, RBC, Scotiabank and TD Bank.

October 3, 2017: Bought deal offering of 4,348,000 subordinate voting shares at $9.20 for $40,001,600 led by National Bank Financial Inc. and GMP Securities L.P.

May 26, 2015:  IPO of 13,287,100 Subordinate Voting Shares and Variable Subordinate Voting Shares from treasury and 9,112,900 Offered Shares by the Selling Shareholders at a price of $6.25 for $140,000,000 led by National Bank Financial Inc., GMP Securities L.P., and BMO.

3. Technical Analysis:

As with young companies, RAY.A is currently range trading as investors absorb the rather large public offerings.  We surmise that there will be an inflection point when the fundamentals overcome the sideways consolidation so for now, we are accumulating in the low $8.00 range which is any price under $8.20.

Summary: “3V-Analytics®” on Stingray Digital:

With the acquisition of Newfoundland Capital Corp. Ltd., Stingray Digital has become the premier as well as Canada’s leading multilevel music supplier.  And as they are growing their Subscription video-on-demand, (SVOD), this industry consolidator is gaining strength and momentum through their purchases and synergies and should yield strong results in the foreseeable future as seen with most consolidators dominating an industry sector.