7th Jun 2019 16:39
LONDON (Alliance News) - 7digital Group PLC on Friday said it plans to raise GBP1.3 million for through a 634.1 million share subscription priced at 0.2 pence per share and said revenue in the first half of 2019 is likely to be significantly below the year before.
The digital music and radio services firm said a consortium of Magic Investments SA and Shmuel Koch Holdings Ltd have agreed to subscribe for all 634.1 million shares, with the proceeds to be used as working capital.
Magic has also agreed to convert the GBP585,932 of principal and accrued interest on its convertible loans notes into 332.9 million shares at a 12% discount to the 0.2p per share subscription price. This 0.2p figure is itself an 11% discount to the closing middle market price of 7Digital's shares on Thursday.
On Friday afternoon, shares in 7Digital closed 42% higher at 0.32p.
In order to allot the subscription shares and Magic's conversion shares, 7Digital plans to subdivide its existing shares of 1p each into one new share of 0.01p and one deferred A share of 0.99p.
Should the debt-for-equity swap go ahead, and the subscription complete successfully, then the consortium of Magic and Shmuel Koch will hold an aggregate of up to 69.7% of 7Digital's enlarged share capital. Magic would hold 39.1% and Shmuel Koch 30.6%.
Shareholder approval is needed both for the subscription and the equity swap. If this is granted, eMusic.com Inc President Tamir Koch is to join 7Digital as non-executive chair and RAM Hand-to-Hand Couriers Group Executive Director David Lazarus will join as a non-executive director.
On May 13, 7digital announced it would likely be unable to continue past June without more funding, and it intends to pursue further equity investment. To this end, once it has published its 2018 annual report - expected before June 30 - the company plans to raise a further GBP4.5 million through a placing and further subscription at that same 0.2p price.
The Magic-Shmuel Koch consortium may subscribe for up to GBP2.5 million of the GBP4.5 million.
7digital's latest vision is for the company "to become the leading supplier of business-to-business music streaming solutions globally", leaving behind its history of "bespoke solutions for a diverse range of customers", which it sees as high risk, in favour of a standardised software-as-a-service product.
Looking ahead, 7digital expects to post a significant drop in revenue for the six months to June 30.
"The board has been undertaking a review of the company's strategy and budgets taking a more circumspect view of the sales pipeline. Consequently, there has been significant disruption within the business since the beginning of the year which has had a marked effect on customer sentiment. Trading has continued to be challenging and the Board expects revenue for the six months to June 30, 2019 to be significantly behind the equivalent period in the prior year," said 7digital.
7digital Chair Don Cruickshank said: "Our new management team of John Aalbers and Julia Hubbard have engineered a new partnership with new investors. This should bring both the capacity to exploit the streaming services market that grows by the day and to exploit new sources of income from blockchain based services for artists."
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