$FNCX Function(x), Inc. (Nasdaq CM: FNCX)
April 12, 2017
Headquartered in New York, Function(x) is led by Chairman and CEO Robert Sillerman, an industry entrepreneur known for his sale of SFX Entertainment, Inc., to Clear Channel for $4.4 billion in 2000. At Function(x), Sillerman is seeking to create a high growth business leveraging a social publishing and interactive media platform. Through its lead web properties Wetpaint and Rant, Function(x) delivers engaging content based on relationships with social influencers and celebrities. On March 8th, 2017, the company announced its intention to acquire BumpClick LLC. An 8K filed by the company on April 3, 2017, outlines that, assuming the close of the BumpClick acquisition, the combined company would have 27mn unique visitors, representing 40mn sessions and 230mn pageviews. In addition, the company would have over 90mn social media followers reaching 340mn people on social networks each month. We see Function(x) as an intriguing speculative turnaround company in the digital media space, with an experienced management team targeting a large end market. The company has made considerable progress over the last several months, with a strategic financing of $4.8mn, the conversion of a preferred share overhang, and plans to shed non-core businesses while refocusing on growth and profitability in coming quarters.
Highlights from the report include:
Attractive end market, execution support growth opportunity
Function(x), Inc. is building a social and interactive media platform aimed at capitalizing on the shifting landscape of media consumption, and particularly the intersection of social media, entertainment, and advertising. Indeed, according to data from MediaKix, provided by the company, US digital advertising spending is expected to reach $100 billion by 2020, representing a compounded annual growth rate (CAGR) of 15% per year. Function(x) appears positioned to target this opportunity through media properties Wetpaint and Rant, where it attracted approximately 210mn page views in March, and has accumulated 10mn+ social media followers. Importantly, according to company data, Function(x) has a clearly defined user base, with 80% of its traffic stemming from mobile devices, and a gender breakdown of 85% women and 15% men.
The company's lead web property is Wetpaint, an online destination for millennial women covering entertainment news and pop culture. Rant is a network of sites with content focused on sports, pets and lifestyle. Function(x) also holds an interest in fantasy sports gaming through DraftDay Gaming Group, Inc. (DDGG), though recent announcements suggest this unit may be shed in coming quarters. In addition to its native audience, Function(x) also leverages a social media platform that includes access to exclusive content from celebrities and influencers, patented technology, and optimized integration with advertisers and consumer brands. If consummated, the March 8 announcement that Function(x) would acquire BumpClick would likely accelerate the growth of this platform. Management estimates that, post-acquisition, the combined company would have 27mn monthly unique users.
Financing, preferred conversion are first steps in turnaround
Function(x) appears to be a turnaround situation in which the company has recently taken important steps to restructure its balance sheet and streamline its business lines, with an aim to focus on its most promising growth businesses and likely seek complementary acquisitions. As part of this process, Function(x) recently raised $4.8mn in new equity capital in February. Additionally, Function(x) CEO and founder Robert Sillerman converted his $37mn in preferred stock holdings into common equity at a conversion price of $2.34 per share, removing an overhang and increasing his alignment with common shareholder interests. The company's strategic moves are not yet complete, as Function(x) has stated that it is in the process of renegotiating its debt, and is also evaluating the sale of non-core assets, which could include its interest in DDGG.
April 12, 2017
Headquartered in New York, Function(x) is led by Chairman and CEO Robert Sillerman, an industry entrepreneur known for his sale of SFX Entertainment, Inc., to Clear Channel for $4.4 billion in 2000. At Function(x), Sillerman is seeking to create a high growth business leveraging a social publishing and interactive media platform. Through its lead web properties Wetpaint and Rant, Function(x) delivers engaging content based on relationships with social influencers and celebrities. On March 8th, 2017, the company announced its intention to acquire BumpClick LLC. An 8K filed by the company on April 3, 2017, outlines that, assuming the close of the BumpClick acquisition, the combined company would have 27mn unique visitors, representing 40mn sessions and 230mn pageviews. In addition, the company would have over 90mn social media followers reaching 340mn people on social networks each month. We see Function(x) as an intriguing speculative turnaround company in the digital media space, with an experienced management team targeting a large end market. The company has made considerable progress over the last several months, with a strategic financing of $4.8mn, the conversion of a preferred share overhang, and plans to shed non-core businesses while refocusing on growth and profitability in coming quarters.
Highlights from the report include:
Attractive end market, execution support growth opportunity
Function(x), Inc. is building a social and interactive media platform aimed at capitalizing on the shifting landscape of media consumption, and particularly the intersection of social media, entertainment, and advertising. Indeed, according to data from MediaKix, provided by the company, US digital advertising spending is expected to reach $100 billion by 2020, representing a compounded annual growth rate (CAGR) of 15% per year. Function(x) appears positioned to target this opportunity through media properties Wetpaint and Rant, where it attracted approximately 210mn page views in March, and has accumulated 10mn+ social media followers. Importantly, according to company data, Function(x) has a clearly defined user base, with 80% of its traffic stemming from mobile devices, and a gender breakdown of 85% women and 15% men.
The company's lead web property is Wetpaint, an online destination for millennial women covering entertainment news and pop culture. Rant is a network of sites with content focused on sports, pets and lifestyle. Function(x) also holds an interest in fantasy sports gaming through DraftDay Gaming Group, Inc. (DDGG), though recent announcements suggest this unit may be shed in coming quarters. In addition to its native audience, Function(x) also leverages a social media platform that includes access to exclusive content from celebrities and influencers, patented technology, and optimized integration with advertisers and consumer brands. If consummated, the March 8 announcement that Function(x) would acquire BumpClick would likely accelerate the growth of this platform. Management estimates that, post-acquisition, the combined company would have 27mn monthly unique users.
Financing, preferred conversion are first steps in turnaround
Function(x) appears to be a turnaround situation in which the company has recently taken important steps to restructure its balance sheet and streamline its business lines, with an aim to focus on its most promising growth businesses and likely seek complementary acquisitions. As part of this process, Function(x) recently raised $4.8mn in new equity capital in February. Additionally, Function(x) CEO and founder Robert Sillerman converted his $37mn in preferred stock holdings into common equity at a conversion price of $2.34 per share, removing an overhang and increasing his alignment with common shareholder interests. The company's strategic moves are not yet complete, as Function(x) has stated that it is in the process of renegotiating its debt, and is also evaluating the sale of non-core assets, which could include its interest in DDGG.
