Chicken Soup for the Soul Entertainment, taking advantage of all-time high prices for its shares, plans to raise $75 million from a sale of its stock.
The streaming-focused outfit said this morning it will sell 1.875 million shares at $40 apiece, with the offering scheduled to close on July 7. It had previously teased the offering plan without specific figures attached.
Shares in Chicken Soup have more than tripled over the past year to all-time highs, the most dramatic surge since the company’s IPO in August 2017. In recent months, it has taken full control of Crackle in a two-step deal with Sony, and also acquired the assets of longtime film and TV producer Sonar Entertainment.
Proceeds from the share sale will go toward the rollout of a Chicken Soup for the Soul-branded streaming service later this year. The new AVOD platform will complement the company’s existing ones, chief among them Crackle and Popcornflix.
Investors, as is typical when a company sells shares and dilutes existing holders of a stock, have reacted coolly to the news. Chicken Soup stock fell 4% in early trading to $40.01.
Eric Wold, a media analyst with B. Riley Securities, praised the offering in a note to clients. “We view this as a positive strategic move to position the company for additional content pursuits to both increase the attractiveness of the various AVOD services to viewers and to drive gross margins higher,” he wrote. The company “is well positioned to benefit from attractive underlying AVOD service demand trends and a shift in advertising dollars.”
The analyst reiterated his “buy” rating on the stock, along with a 12-month price target of $62.
The forthcoming AVOD service will have strong appeal to female viewers and families, Wold added, and will prompt a “significant increase” in ad inventory.
While Chicken Soup is small relative to AVOD rivals like Hulu, Peacock and HBO Max, it is growing significantly. In the first quarter, it reported revenue of $23.2 million, a 75% year-over-year gain driven by advertising.