The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
By the way, to calculate the bond interest, the interest rate is 6%, half is repayable in December 2020 and half in December 2021. So for the principal of $28m, ($14m*1.06*1.06)+($14m*1.06*1.06*1.06)-$28m = interest of $4.4m.
So even if Matomy had to pay interest, which I don't think they will, there would still be a $3.6m surplus from the sale to Team Internet.
Ironic, you are quite right. However most of the text in the annual report is copied from the 2018 financial report from the 1st of April. This was released before the RNS of the 8th of April which clarified that the bondholders would not be be paid interest, so I think it is just a mistake. If you look at what the bondholders actually voted for, (which is available on TASE), you can see that they voted for repayment without interest. I agree that the annual report is a source of confusion though.
Ironic, thanks for checking my assumptions. I think your assertions are incorrect though.
1) See the RNS on the 8th of April, "Letter to the Bond Trustee", which confirms that the bonds will be repaid at par value, so only NIS 101 million ($28 million).
2) The revolving credit line belongs to Team Internet and will stay with them post sale. The term loans that Matomy had were paid off in Q1. The liabilities of $1.8 million include paying interest on the bonds, which won't be required if Team Internet is sold.
3) I don't think a holding company has many bills to pay! In fact it is the opposite: in the annual report from the 30th they say they have recieved a further $250k from the sale of myDSP and a further $500k from the sale of Mobfox, so the cash balance is higher than previously reported.
See the RNS on the 2nd of April "Taptica Int. Ltd - CEO Appointment, Trading Update and Share Buy-back":
"Following completion of the acquisition of RhythmOne, the Company has been informed that, on a standalone basis, RhythmOne's trading for the year to 31 March 2019 was below market expectations."
ragnarlothbrok, thanks for the civil response.
> FundPanda, please provide your data that tells you investment in the performance marketing business has been declining. That would be really useful to my own analysis.
I have no data on this - the R+D expenditure is not broken down by business. I only note that the performance marketing revenue has dropped due to quality issues that Rhythm invested in to avoid but Taptica did not. The high share price at the beginning of 2018 was due to the rate of growth of this business, which explains why the share price dropped by a quarter in April 2018 as the growth slowed (and is now negative). A positive though is that Taptica now has media quality checking by virtue of the Rhythm merger.
> If Hagai didn't think that the shares were worth more than 140p why did he buy in at 300p on 04/04/2018? Does he think the prospects of the business have declined by more than 50% in one year?
Good point, and I note that he also purchased a few days before at 362p. Other plausible narratives for the sale is that he has no interest in being a passive investor and instead plans to use the money to start another company. Alternatively, he may be arrogant enough to think the Taptica can only flourish under his command, and will collapse under anybody elses. If some other explanation like this is revealed to be the truth then Taptica will have done well to buy back the shares on the cheap, but we just don't know yet.
The SP would be massively below other competitors if they were true, but I think there is a lot of doubt about whether they are. The former CEO was convicted of fraud, and then sold a huge chunk of shares at a 20% discount, an indication that he didn't think they were worth as much as they were.
The driver of the high SP in the past has been the huge profits made by the core Taptica company. Not only do the huge profits now seem implausible, but the company has not invested in this highly profitable part of the company but instead pursued acquisitions. It now wants to change the company name away from Taptica.
Notice also that the company markets itself mainly to shareholders - see today's RNS: does the stock market really need to be informed that the company has created a new team???
Unfortunately, my personal view is that the company will announce it has discovered 'accounting irregularities' at some point in the near future. There are too many red flags.
Also, the memorandum of understanding says that Matomy will get to keep a $3 million German tax refund due this year, so that takes the total cash balance to $18.5 million, way ahead of the £6 million market cap. I'm definitely in favour of the sale, which should complete by the 12th of May.
Looks like the market is realising the buyback by Team Internet is a good thing, despite the 40% discount. The bondholders voted for repayment at par value (i.e without interest), which will cost NIS 101 million ($28 million), leaving a surplus of $8 million for Matomy from the $36 million to be paid by Team Internet. Add to that the cash on hand at the beginning of April which was $7.5 million (see the annual results), and you have $15.5 million, a considerable surplus to the current shareprice.
Matomy has no debt other than the bonds, and the only liability is an empty office rental costing $2 million, which the company could hopefully sublease.
As many have already said, Matomy would be worth much more if it purchased the final 10% of Team Internet, but nobody seems willing to put up the cash to do so, so the buyback is the second best option.
Matomy hasn't said how they plan to distribute the $15.5 million, but the AGM on the 28th may be when they reveal their plans.