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Montreal Streaming Music Service Stingray Prepares For IPO

StingrayMontreal-based provider of streaming music services, Stingray Digital Group Inc., is said to be preparing for an IPO, rumoured to be in the neighbourhood of $120 million.

The offering is being prepared by a syndicate of underwriters, including National Bank Financial Inc., GMP Securities L.P. and BMO Nesbitt Burns Inc., as well as CIBC World Markets Inc. and TD Securities Inc.

Stingray began life in 2007, with the Karaoke Channel, expanding after the acquisition of Galaxie from the CBC, which it relabeled as Stingray Music. Expanding into Latin America, the Caribbean and Europe over the last several years, Stingray now counts over 180 million customers in 113 countries and has over 225 employees in seven offices worldwide, including in Miami, Tel Aviv, London and Amsterdam.

As well as offering Pay-TV services to consumers, Stingray, through its Business Division, offers streaming and digital display services.

While the consumer-facing service is better known, it’s the B2B solution that brings in the lion’s share, approximately 90%, of its revenue.

The prospectus for the deal, available on the Sedar website, highlights the significance of Stingray’s long-term relationships with its “blue chip” clientele, including Bell, AT&T, Rogers, Shaw, Vidéotron, Comcast, Cogeco, ALDO and Sobeys.

“Our business model is based on subscription revenues, which gives us significant predictability of future cash flows, reduces cyclicality of earnings, and increases customer retention. As a result, we have established deeply integrated and long-term relationships with many of our customers, providing recurring annual revenues of $64.0 million at the end of Fiscal 2015 (90% of our total revenue).”

The “Plan of Distribution”, outlined in the prospectus, indicates that Subordinate Voting shares will be made available to purchasers who are “Canadian”, according to the CRTC definition, with Variable Subordinate Voting shares being made available to non-Canadians.

The prospectus shows revenue for the company at $60 million for 2014, with projected revenue of $71 million for 2015.

While much of the money raised from the IPO is earmarked “for working capital and general corporate purposes”, it is also intended to pay down company debt.

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