Vancouver’s BBTV Holdings Shares Disappointing TSX Debut Amid Widespread Market Liquidation

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Shahrzad Rafati, CEO of BroadbandTV Corp., takes part in a panel discussion at the Business Women Leaders Working Group Forum on the sidelines of the G20 summit in Buenos Aires, Argentina, Nov. 29, 2018.

Sean Kilpatrick / The Canadian Press

Vancouver-based BBTV Holdings Inc. got off to a rocky start on the Toronto Stock Exchange on Wednesday, eclipsing its milestone of closing the largest public offering in Canada from a company led by a single founder.

Subordinate voting shares of BBTV, the parent company of online video platform BroadbandTV, traded lower all day and closed at $ 15, or 6.3% of its issue price. $ 16 as stocks fell widely in North American markets. BBTV raised $ 172.4 million when it went public.

BBTV CEO Shahrzad Rafati avoided the debut, saying in an interview on Wednesday: “I’m not at all [worried] On the first day, it might not be what we wanted. The markets can be difficult at times. We’re there for the long game. We really want to gain traction today, but we are building a very strong business.

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Ms Rafati, who holds 83% control of the votes after the IPO, said the offer “opens up new horizons and opens the way for countless women and girls who envision a future with more potential to be. leaders ”.

Two sources close to the deal said investor demand was relatively subdued as BBTV received orders for shares equal to twice the offer value and valued the shares at the low end of a 14 range. $ to $ 22 set by subscribers. This compares to several recent Canadian tech deals that were scaled up after receiving orders 10 times or more than supply sizes. Canaccord Genuity and Scotia Capital led the underwriting syndicate.

One of the sources said the institutions had bought 60% of the offering. Individual investors bought 40 percent, more than double their typical IPO allowance. Ms. Rafati and manager Hamed Shahbazi bought 10% of the offer. The Globe and Mail does not name the sources because they were not authorized to speak publicly on the matter.

BroadbandTV helps video creators make more money from advertising their content on YouTube, Facebook, and other online channels than if they were publishing it themselves. With the collective weight of its platform, BroadbandTV – the second-largest online video provider behind Google – sells aggregated content to advertisers in the form of packages, which helps increase creator views and revenue. BroadbandTV videos garnered 439 billion views last year.

The main goal of the IPO was to end a deadlock between Ms Rafati and European media giant Bertelsmann SE & Co., which bought 51% of BroadbandTV through its subsidiary RTL Group for $ 36 million in 2013. The agreement gave RTL and the minority shareholders the right to redeem each other or drag each other into a sale. Ms. Rafati stayed on to run BroadbandTV.

But in January 2017, RTL refused to exercise its redemption right. At the time, Ms. Rafati said that BroadbandTV was “definitely” worth US $ 1 billion. (Its market capitalization was $ 308 million at Wednesday’s close). But RTL chose not to pay the amount determined during a fair market value assessment. Finally, last year RTL agreed to sell its stake to minority shareholders for $ 158.8 million, which resulted in the IPO. BBTV was a holding company for their interest in BroadbandTV; it now owns the full entity.

BroadbandTV generated revenue of $ 372.4 million in 2019, but 89.5% of that went to content creators, meaning that actual revenue was closer to $ 40 million. He lost $ 8.2 million last year.

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The company strives to sell “value added” services to creators, such as direct advertising campaigns and the creation of mobile applications. This business generates much higher margins and represents less than 30% of BroadbandTV’s gross profit. Ms. Rafati said The company had a “multi-billion dollar opportunity” to shift more existing designer clients to higher-value services.

BroadbandTV’s rate of growth in pageviews slowed to 4.2% last year, down from 20.5% in 2018, after dropping out content creators deemed “objectionable.” (Revenue growth fell to 11.2% from 38% during the same period.)

Income was also low at the start of the pandemic. But Ms Rafati said pageviews and revenue increased 15% and 25%, respectively, in the third quarter, adding that BroadbandTV would show “similar growth rates … going forward.”

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