Crowd Media strengthens cash war chest to harness influencer marketing

Social commerce business Crowd Media Holdings (ASX: CM8) has emerged from a self-imposed trading halt to announce a successful $4 million capital raise.

Moreover, in a situational update published this morning, Crowd chairman Steven Schapera said the company’s four-step turnaround initiative that first began in September 2019 was now complete.

Proceeds from the raising will strengthen the company’s balance sheet and accelerate research and development of Crowd’s “Talking Head” artificial intelligence-powered technology.

The cash will also boost inventory for its e-commerce division, Crowd Direct and reduce the company’s existing debt facility “by a minimum of $750,000”, Crowd said.

Moving forward, Mr Schapera declared the company now has its “ducks in a row” and remains committed to executing its foray into the fintech and insuretech sectors, as planned, in 2021.

In a letter to shareholders, Mr Schapera explained that when he and his consortium first looked into acquiring Crowd Media last year, the company was in a “vulnerable” financial position with debt and cash flow issues.

At the time, Crowd’s automated question and answer (Q&A) technology was identified as its core value asset with the most commercial potential within the influencer marketing space.

More than a year on, the company is now on an equal footing and targeting ambitious growth multiples in the coming years as its revenues continue growing while its costs have been reined in.

Attracting a crowd

According to Mr Schapera, a collaborative trio of himself, co-investor Robert Quandt and incumbent chief executive officer Domenic Carosa commenced the company’s turnaround, beginning with fixing the services it was offering at the time.

Late last year, Crowd’s Q&A vertical “faced massive regulatory headwinds and is performing far better than it otherwise would have if we weren’t watching it very closely,” Mr Schapera said.

“Critically, the underlying tech is the platform upon which we are building our Talking Head. Crowd Direct, our direct-to-consumer vertical now has five brands in the portfolio and quarter-on-quarter revenue growth is 136%,” he added.

The next aspect requiring immediate attention was Crowd’s organisational structure and human resources department.

Mr Carosa took up the reins in realigning the company’s organisational structure and optimising its ranks, including reshuffling its internal workings to better fit a new influencer marketing focus change and a pivot towards conversational commerce.

Crowd also strengthened its board by appointing John Palermo, a veteran accountant with over a decade’s in listed company experience.

“It’s an ongoing process, but what we have today is substantially leaner and meaner, more agile, and morale is certainly higher than it has ever been before,” Mr Schapera said.

As a consequence of tweaking its product and service line up, Crowd was able to improve its profitability and cash flow after sustaining “heavy losses” in the 2019 financial year. The company closed out 2020 with an underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of $140,000 – a feat Mr Schapera hailed as a taster of what is to come.

“We now have the funds to properly finance our research and development and become an innovator again, whilst also having the funds to invest in revenue growth capability,” he said.

Capital raising

Last but not least – Crowd has reinforced its balance sheet with a $4 million capital raise and said it is confident of reducing its debt arrears as well as accelerating its business development in digital media.

The company raised the $4 million through a placement of 80 million ordinary shares at $0.05 per share and will also issue 40 million options at an exercise price of $0.07 with a two-year expiry.

“Having just completed a $4 million capital raising at a price representing a significant premium to when we first got involved, we are now sitting on almost $6 million in cash and will look to substantially reduce or extinguish our Billfront debt facility,” Mr Schapera said.

“We now have a company that is on a mission to lead the conversational commerce space,” he added.