Main photo: The A-Team's 1983 GMC van. Credit: Doug Kline. Licensed under Creative Commons Attribution 2.0 Generic (CC BY 2.0).
I was rather disappointed to find out about a possible takeover bid for Audioboom at the start of last week by a company called All Active Asset Capital, making a proposed offer for the podcasting firm worth £12 a share. The bid caused some consternation amongst some of the private investors frequenting online forums such as LSE and ADVFN. Many of them have complained about being offered just £2 a share in cash and the rest in new AAA shares, as well as the fact that AAA is set to be delisted from the AIM market, meaning that some investors would no longer be able to benefit from tax-free treatment in ISAs, and there’s no guarantee AAA will be listed in future on another exchange, as suggested.
There’s also a line in the regulatory news announcement that somewhat sticks in the back of the throat, suggesting that Audioboom’s advisors have set a £25 per share target price (worth £392m) as part of any possible rival takeover bid that could render AAA’s bid null and void. This is particularly important because the AAA bid has already received support from Candy Ventures and AAQUA, representing 26.4% of Audioboom’s share capital, and AAQUA is connected to AAA. So it seems to some disgruntled private investors that these major shareholders connected to the company making the bid are effectively suggesting , “we’ll pay Audioboom shareholders £12 a share, but we’re not willing to part with our shares for anything less than £25”. It’s not actually as clear cut as that, but I do echo the concern here that £12 seems too cheap, especially since Audioboom’s latest results for the six months ending 30 June 2021 finally show the company making a tiny profit – the financials are finally starting to bear fruit after several years of work. Furthermore, this deal is rather circular in nature – AAQUA owns part of Audioboom, Candy owns part of AAQUA and Audioboom, AAA has options in AAQUA, AAA is making an offer for Audioboom.
I’ve written previously here about Nick Candy selling a chunk of Audioboom shares to AAQUA, which is led by Robert Bonnier and has connections to others involved in Audioboom. This bid also fits into this idea of various interconnected investors described in a previous blog post on River Otter Investments, which I was happy to see some fellow investors mention in their research into this bid. I’m also rather perplexed, as are other private investors, as to how Audioboom fits in with AAA’s other interests, notably options to buy an interest in AAQUA, which have been partly exercised, and the acquisition of shares in a Belgian company called Sentiance. The timing just a day before the release of Audioboom results is also extremely curious.
Sought after acquisition target
I first want to chat about the whole idea of Audioboom being bought out, because this isn’t the first time it has been on the cards. The company previously hired Raine Advisors to supposedly help in “examining strategic options”, although this was clearly about trying to find a buyer for the company. In April, Nick Candy appeared to suggest that Amazon consider acquiring Audioboom, according to a Bloomberg article, since it was “the last big independent left” in the podcast industry. Then of course, it wasn’t long ago that Audioboom was involved in the failed reverse takeover of Triton Digital, which cost Audioboom £0.7m in cash and shares. At the same time, several other firms have been snapped up in a wave of consolidation in the podcasting world. I’m also not really convinced by management’s argument that being listed in London, rather than New York, has resulted in a complete lack of interest, as suggested by Audioboom CEO Stuart Last in the Bloomberg piece. It is true that tech companies attract bigger valuations and there’s more investor appetite in the US. But listing outside of the US didn’t stop podcasting rival Acast recently IPO-ing in Sweden, with a current valuation of around £423m, compared to Audioboom’s market capitalisation of approximately £150m.
For me, there’s maybe a slight air of desperation with all of this talk of Audioboom being up for sale, which is a real shame because the company has taken real strides since Stuart Last took over. The best companies don’t talk publicly about a takeover unless something really is in the works, as I’ve chronicled previously with Haynes Publishing. This company did indeed go through a formal sales process, but unlike Audioboom, without the baggage of a failed reverse takeover, press articles appearing to solicit offers and a bid from a company with a number of interconnected interests.
So this bid for Audioboom makes me wonder why certain shareholders are so keen to sell their investment, and secondly whether in fact the bid of AAA is some kind of ruse to prompt another offer from someone else. At this stage, I simply don’t have the answers to those questions. With respects to Nick Candy, he’s been a long-standing investor in Audioboom, but is he short of cash right now? Who knows! A cursory Google search throws up the sale of his One Hyde Park penthouse flat for £175m and a recent £4m tax bill shared with his brother for the purchase of a Georgian mansion, however, another article in The Daily Mail claims Candy has splashed out £10m on a plush pad in Oxfordshire. No, I don’t think we can infer much from press reports about his cash flow and property interests, the guy is a wealthy property developer in any case. And good luck to him, but I’m not interested in his net worth. Plus, surely if this were just about cash for Candy, then why would he support a proposed offer including just £2 per share in cash.
If we go back to Candy’s transfer of some Audioboom shares for an interest in AAQUA, then maybe this is about parlaying his Audioboom investment into some bigger play. But it is not clear to me whether everybody else involved is on the same wavelength. A subsequent announcement from Audioboom rejects the AAA offer on the basis of the valuation, the structure and strategic rationale. The next day AAA said it was still committed to pursuing a possible takeover. Important to note in these statements is Audioboom’s reference to the independent directors, having excluded Steven Smith from this statement because of his relationship with Candy Ventures. Of these independent directors, Michael Tobin is the one that sticks out to me since he’s been very active in buying shares and has also provided funding to Audioboom.
Tobin previously spent a decade leading datacentre business Telecity, before being forced out by management, according to The Times. Although seen as something of a maverick, Tobin reportedly made his staff swim with sharks, he seemed to be focused on growing the business over the long term, and it is perhaps interesting that Telecity merged with a US company just months after Tobin’s departure. I wonder whether Tobin as Audioboom chairman, and someone who is interesting in value creation over a long timeframe, would be for or against such a takeover from AAA.
A new UK-based ARK Invest?
Now to the complementary nature of such a deal, because as AAA states the proposal has the aim of turning it into a “global technology investment company”. AAA’s two main interests are Sentiance, described as an “intelligence-driven data science and behaviour change company, and AAQUA, said to be a “global services platform designed around ’Passion Communities'”. Looking first at the latter of those two, AAQUA, and I struggle to understand exactly what their product is and what it does.
AAQUA has some 175 employees lured away from big tech firms such as Facebook, Netflix and Twitter, according to an update from AAA in June 2021. The video promos are rather slick, suggesting some kind of app that gathers together different communities of interest. Nevertheless, I’m not sure how it differs to existing social networks or what it offers that makes it unique. They’re hiring extensively, advertising vacancies in Singapore, London and Antwerp, and a search on LinkedIn does indeed demonstrate the calibre of its staff. But as I’ve already said, there’s not yet any product available, and despite raising €6m from AAA in March, the company appears very much at a nascent, startup phase. Without even digging into the product it is creating, which could be fabulous, it isn’t anywhere near where Audioboom is at, neither is it even at the same sort of stage Audioboom was at when it first came to the AIM market in a reverse takeover. At least Audioboom then had some kind of service it was actively offering, that being an audio hosting platform.
Sentiance is a slightly different beast and has been around in one shape or form for several years. It was previously known as Argus Labs and raised $2m in 2015 from investors including venture capital funds Qbic and Volta Ventures. Later in 2015, it raised another $5.2m in funding from investors including the Samsung Catalyst Fund, and has previously talked of work with PSA Group and Realize Mobile. In 2017, it raised €10m from a UK-listed company called Monchhichi, and another €8m led by Volta Ventures and supported by KPN Ventures, as well as previous investors.
Monchhichi piques my interest since it later went into voluntary liquidation in 2018 and assets were distributed to shareholders through the allocation of shares in a company called High Growth Capital. Monchhichi had said that it planned to increase the shareholding in Sentiance and subsequently the UK company was delisted from the AIM market in January 2018. High Growth Capital had shareholders including investor Chris Akers and the company became Mesh Holdings. We’ll come back to this a little later.
Sentiance has also blogged about partnerships in China with Shanghai PingJia Technology and TalkingData. In 2019, it announced a partnership with Autoliv, a Swedish-American automotive safety supplier, and according to a post in 2020, Trov, a company working an insurance technology, uses the Sentiance platform. This year, Sentiance said it had launched a trial with RAC in Australia using an app to help change driving habits.
Partnerships are all well and good, but what about actual business deals? Well, in their 2020 review, Sentiance says they have “new global customers across the insurance, banking and mobility industries”, as well as securing, “new client contracts in family safety, insurance, retail banking and social media & services”, in the fourth quarter of 2020. In the “Industry” section of their website they display corporates logos from Uber, Autoliv, Absa, Trov, PSA Group, Xefyr and Risk. In addition, a document from Mesh Holdings details additional clients including Careem, Samsung and Sparebank/Fremtind.
Some 60 people work at Sentiance, according to a search on LinkedIn, and both Michael Power and Frank Verbist also hold roles at AAQUA. Sentiance is assigned at least four patents, according to a search on Google Patents. These patents have various different statuses and cover areas such as geo-information, determining behaviour from sensor data, classifying activity of a user and gathering mobility information.
Returning to the company financials, Sentiance has raised almost $30m in funding over 7 rounds, according to Crunchbase. The company’s accounts for 2020, recently filed with the Belgian authorities, reveal that Sentiance had assets worth €6.6m, total liabilities of €6.6m, made an operating loss of €3.7m, with a total loss for the year of €3.8m. The turnover is not indicated, but non-recurring operating income is given as €3,500. The gross margin is negative, at almost €0.6m. Remuneration, social security costs and pensions were almost €3m. Losses were even bigger for the previous financial year, in the red to the tune of €5.7m. The company owns subsidiaries in the UK, US, Lithuania, Canada and China.
Now let’s go back to the shareholdings in Sentiance, AAQUA and ultimately Audioboom. As I’ve already signalled Monchhichi, which became Mesh Holdings, was already involved in a fundraising for Sentiance. Digging around on the website for Mesh Holdings, reveals that they put in €7m, which at the time was equivalent to 9.8% of Sentiance’s share capital. In an update posted in March 2020, Mesh Holdings said it owned 16.8% of Sentiance’s stock and had secured an agreement for options in shares upon payment of €31.4m, which would bring its total holding to 47.7% of the share capital.
Let’s just remind ourselves here that the directors of Mesh Holdings include Robert Bonnier, founder and CEO of AAQUA, and Michael Power, who is chairman of Mesh Holdings and a director of both AAQUA and Sentiance. In the same March 2020 update by Mesh Holdings, two other interesting elements are noted. Firstly, Mesh Holdings secured an agreement with RRNB Capital Limited to buy shares in Sentiance worth €5m. This is interesting because the information held at Companies House on RRNB Capital indicate that Robert Bonnier’s wife, Nashida Islam-Bonnier, holds 75% or more of the shares in this company. Secondly, the Mesh Holdings update also references an investment in Sentiance by Asimilar Group. We’ll get to that in a minute.
Before we move on from Mesh Holdings, I’ve noticed that a charge has been created on Companies House indicating that the company was lent €3m by AAA, in exchange for security over its shares in Sentiance. Also digging around in the company’s accounts posted in July 2020, I discovered that Sentiance developed an “intelligence and recommendation platform” called Aaquita. Aaquita? Sounds vaguely familar doesn’t it? Well, it seems that Aaquita was developed by software engineers at Sentiance and the project resulted in a new company called AAQUA. So that clears some things up. AAQUA was actually a spin-off from Sentiance! Mesh Holdings also talks about another investment into a product called Billion Dollar Draw, but there’s not much information available on this. A little reminder here also that Chris Akers holds Mesh Holdings shares, since he was a holder of High Growth Capital, as well as Rodger Sargent, according to a June 2021 update by AAA. Mesh Holdings was previously listed on the NEX Exchange, but was withdrawn and shares aren’t currently tradeable.
Coming back to Asimilar Group, since they’ve also invested in Sentiance, and it has shares held by Chris Akers, and Mark Horrocks, a list of major shareholders on Asimilar’s website says. Horrocks also holds 1.39% in Audioboom, according to a regulatory filing following the AAA proposal. Asimilar subsequently holds 8.3% in the share capital of Mesh Holdings, giving it an indirect interest in Sentiance. Chris Akers was interested in 7.53% of the share capital, Peter Antonioni of 192 owned 5.47% of Asimilar, and Mark Horrocks had 5.04% plus a number of warrants. As announced in July 2020, AAA also has an interest in Asimilar Group.
AAA had in July announced that had agreed an option enabling it to buy 125,000 shares in AAQUA for €125m. AAA raised £15m through a placing of shares and said it had conditionally raised another £135m, which is contingent on the purchase of at least 75% of Sentiance and exercising the remainder of its option in AAQUA. The acquisition of Sentiance is actually being carried out by Mesh Holdings, with the company receiving AAA shares in return. Once complete, 75% of Sentiance will be owned by AAA and the balance owned by AAQUA, according to details from AAA.
In terms of Audioboom shareholders, we’ve seen a deluge of filings related to >1% shareholders…
|Candy Ventures (Nick Candy)||15.59% (including warrants)|
|AAQUA||14.0% initial, then bought 0.1%, then bought 6.3%|
|192 Pte Limited (Peter Antonioni)||7.3% initial, then sold 1.1%, then sold entire holding|
|Herald Investment Management||5.56%|
|David Von Rosen-Von Hoewel||2.08%|
|Edge Performance VCT||1.81%|
|Barclays||0.03% ordinary shares & 0.03% short position initial,|
then increased ordinary shares to 0.06% and short
position to 0.06%
|Michael Tobin||1.98% (plus warrants for 350,000 shares)|
|Stuart Last||0.09% (plus warrants for 300,000 shares)|
So the total concert party is stated as 4.56%, but in fact, if we take into account outstanding warrants, this increases. You’d expect that these options would be carried out since the exercise prices are much lower than the current share price.
Disclosures for AAA shareholders > 1% are rather confusing given that the company was delisted from the AIM market on 30 July. I’m not clear if this represents all the >1% holders, but I’ve checked both the Investegate and London Stock Exchange website since I’m slightly concerned I don’t have all the information from online sources…
|192 Pte Limited (Peter Antonioni)||13.3% (including warrants)|
|David Von Rosen-Von Hoewel||8.7%|
|RBNI Holdings Ltd (Robert Bonnier, Mrs N Islam-Bonnier, S Vanderlip, Z Vanderlip)||5.4%|
|Candy Ventures (Nick Candy)||1.75% cash-settled derivatives, 9.71% options, 0.39% warrants|
|Joseph Penna||2.41% (shares & derivatives)|
|Anthony Marcus, Jason Marcus & Marisa Marcus||2.4%|
The percentage holdings of AAA directors isn’t stated by the regulatory disclosure, but if we use the return done by AAA at the start of July, outlining share capital of 1,029,398,988 shares, we can get an idea…
|Rodger Sargent||0.5% (plus options over 25.5m shares)|
|James Normand||Options over 5.1m shares|
|Colin McQuade||Options over 12m shares|
According to my calculations, if all options were exercised, Rodger Sargent would hold 2.85% of the enlarged share capital of AAA.
It is clear that a significant portion of AAA shareholders also hold Audioboom shares, notably:
- Peter Antonioni (although he’s recently sold his Audioboom shares)
- Nick Candy
- AAQUA (or RBNI Holdings Ltd)
- David Von Rosen-Von Hoewel
- Chris Akers
- Mark Horrocks
- Michael Power
- Jeremy Fenn
- Warren Todd
It seems pertinent that Michael Power, of Mesh Holdings, AAQUA and Sentiance, is now a shareholder of Audioboom. Also David Von Rosen-Von Hoewel became a shareholder of Audioboom since the formal sales process last year. I found it curious that Peter Antonioni has sold out of Audioboom at the same time that AAQUA bought in. It is also interesting that Barclays is holding Audioboom shares and a short position that they increased recently, and Nick Candy is using some derivatives for his AAA shareholding too.
We already know that AAQUA and Candy Ventures support the AAA proposal, representing almost 30% of Audioboom’s share capital (if we include the warrants). If we count the shareholders that I’ve previously discussed as interconnected, as well as those who have shareholdings in both companies, then I estimate that we’re looking at around 50% of Audioboom shareholders that know each other, have worked together previously, or are involved in both companies, excluding Audioboom directors.
The potential bid for Audioboom is said to be structured as either a scheme under Jersey Law, since that is where the company registered, or by way of a contractual offer to buy Audioboom shares. In the first case, I understand that 75% of shareholders would need to agree to the bid, according to guidelines from Ogier law firm. A contractual offer requires over 50% of the share capital to be successful, although law firm Burges Salmon suggests the acceptance condition is more usually set at 90%.
In terms of the pre-conditions set out by AAA for the potential offer – AAA successfully completing the placing and raising £15m, it buying at least 75% of Sentiance, and cancelling the trading of its shares on the AIM market. For timing, AAA must announce an offer by 16 August, or else say that it won’t be making a bid. The announcement also says AAA may waive the recommendation by Audioboom’s board, which would effectively be a hostile takeover.
So, that finally brings us to a question that I’ve mulled for a few weeks, and whilst putting together this post…what to do? Well, I decided to sell my entire holding and managed to get £9.20 a share. I did so, with the sentiment I expressed at the start of this post, a slight sense of sadness. I believe in what this business does and am happy to see it finally becoming profitable.
But on the negative side, there are too many things going on which make me feel comfortable. Why is there such an elaborate structure surrounding AAA, Sentiance and AAQUA, with overlapping interests between them, as well as, Mesh Holdings and Asimilar Group? What exactly is the play with Audioboom here? There are too many questions and not enough answers. I’m sure certain parties involved in this have a better idea of what’s going on, compared to what has been revealed so far, but I’m not privy to any of that. I was maybe a bit premature cutting my Audioboom holding previously when I sold some shares following the purchase by AAQUA, especially since the share price has doubled since then. But these moves don’t sit comfortably with me and I’d rather not worry about what is going on behind the scenes and stick to what I can actively research and dive into, rather than spending time constructing narratives around the potential intentions of major shareholders.
Audioboom may well be bought by AAA we’ll find out more in a few days. In case the AAA bid doesn’t materialise, then I can only expect the share price will drop, so perhaps I can buy back in. Otherwise, another bid may emerge from somewhere, although I am slightly sceptical that this will happen. Nevertheless, if the AAA bid does go ahead, then at this stage, without more details, I’m not interested in unquoted AAA share certificates, that may or may not be listed in the future. So, as they say on the Dragons’ Den, I’m out, time to leave my obsession with Audioboom alone for the time being. I’m keen to hear the views and thoughts of others interested in Audioboom, so please feel free to get in touch via the comments section below.
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