Loop Media Finalizes $12 Million IPO Terms (OTCMKTS:LPTV)

What Is Loop Media?

Glendale, California-based Loop Media, Inc. (OTCPK:LPTV) was founded to distribute short-form video content through its self-operated locations and through a partner network.

Management is headed by co-founder, Chairman and CEO Jon M. Niermann, who has been with the firm since inception in May 2016 and was previously founder of FarWest Entertainment and president of Electronic Arts Asia.

The company transitioned to an advertising-based business model in early 2021, and as of June 30, 2022 had 12,584 quarterly active units.

One recently-launched partner will account for 17,000 new screens and another partner network will bring 13,500 screens to the company’s system.

As of June 30, 2022, Loop has booked fair market value investment of $84.3 million of equity and debt as of June 30, 2022 from investors including Dreamcatcher, Running Wind, and Jeremy Boczulak.

The firm seeks network partners who operate out of the home media locations in public spaces in North America.

Loop’s IPO Date & Details

The initial public offering, or IPO, for LPTV is September 21, 2022, and will be available for retail investors to trade on the open market starting September 22, 2022.

(Warning: Compared to stocks with more history, IPOs typically have less information for investors to review and analyze. For this reason, investors should use caution when thinking about investing in an IPO, or immediately post-IPO. Also, investors should keep in mind that many IPOs are heavily marketed, past company performance is not a guarantee of future results, and potential risks may be understated.)

Loop intends to raise $12 million in gross proceeds from an IPO of its common stock, offering 2.4 million shares at a proposed midpoint price of $5.00 per share.

The company’s stock is currently quoted on the OTC Pink under the symbol “LPTV.”

One existing shareholder has indicated a non-binding interest to purchase shares of up to $5.0 million in the aggregate at the IPO price.

Assuming a successful IPO, the company’s enterprise value at IPO would approximate $276.1 million, excluding the effects of underwriter over-allotment options.

The float to outstanding shares ratio (excluding underwriter over-allotments) will be approximately 4.23%. Note: a figure under 10% is generally considered a ‘low float’ stock which can be subject to significant price volatility.

Management says it will use the net proceeds from the IPO as follows:

for marketing, new customer development, payment of offering-related bonuses (in the aggregate amount of approximately $1,100,000) to certain of our officers, working capital and other general corporate purposes.

How To Invest In The Company’s Stock: 7 Steps

Investors can buy shares of the stock in the same way they may buy stocks of other publicly traded companies, or as part of the pre-IPO allocation.

Note: This report is not a recommendation to purchase stock or any other security. For investors who are interested in pursuing a potential investment after the IPO is complete, the following steps for buying stocks will be helpful.

Step 1: Understand The Company’s Financial History

Although there is not much public financial information available about Loop Media, investors can look at the company’s financial history on their form S-1 or F-1 SEC filing (Source).

Step 2: Assess The Company’s Financial Reports

The primary financial statements available for publicly-traded companies include the income statement, balance sheet, and statement of cash flows. These financial statements can help investors learn about a company’s cash capitalization structure, cash flow trends and financial position.

Loop Media’s financials have produced quickly growing topline revenue, higher gross profit but fluctuating gross margin, high and variable operating losses but growing cash used in operations.

Free cash flow for the twelve months ended June 30, 2022, was negative ($12.3 million).

Selling, G&A expenses as a percentage of total revenue have fluctuated materially as revenue has grown; its Selling, G&A efficiency multiple rose to 0.8x in the most recent reporting period.

The firm currently plans to pay no dividends and intends to reinvest any future earnings for its general corporate purposes.

Step 3: Evaluate The Company’s Potential Compared To Your Investment Horizon

When investors evaluate potential stocks to buy, it’s important to consider their time horizon and risk tolerance before buying shares. For example, a swing-trader may be interested in short-term growth potential, whereas a long-term investor may prioritize strong financials ahead of short-term price movements.

Step 4: Select A Brokerage

Investors who do not already have a trading account will begin with the selection of a brokerage firm. The account types commonly used for trading stocks include a standard brokerage account or a retirement account like an IRA.

Investors who prefer advice for a fee can open a trading account with a full-service broker or an independent investment advisor and those who want to manage their portfolio for a reduced cost may choose a discount brokerage company.

Step 5: Choose An Investment Size And Strategy

Investors who have decided to buy shares of company stock should consider how many shares to purchase and what investment strategy to adopt for their new position. The investment strategy will guide an investors’ holding period and exit strategy.

Many investors choose to buy and hold stocks for lengthy periods. Examples of basic investing strategies include swing trading, short-term trading or investing over a long-term holding period.

For investors wishing to gain a pre-IPO allocation of shares at the IPO price, they would ‘indicate interest’ with their broker in advance of the IPO. Indicating an interest is not a guarantee that the investor will receive an allocation of pre-IPO shares.

Step 6: Choose An Order Type

Investors have many choices for placing orders to purchase stocks, including market orders, limit orders and stop orders.

• Market order: This is the most common type of order made by retail traders. A market order executes a trade immediately at the best available transaction price.

• Limit order: When an investor places a buy limit order, they specify a maximum price to be paid for the shares.

• Stop order: A buy-stop order is an order to buy at a specified price, known as the stop price, which will be higher than the current market price. In the case of buy-stop, the stop price will be lower than the current market price.

Step 7: Submit The Trade

After investors have funded their account with cash, they may decide an investment size and order type, then submit the trade to place an order. If the trade is a market order, it will be filled immediately at the best available market price.

However, if investors submit a limit order or stop order, the investor may have to wait until the stock reaches their target price or stop-loss price for the trade to be completed.

The Bottom Line

LPTV is seeking public capital market investment to fund its general corporate initiatives and to pay bonuses to its executives.

The market opportunity for digital out of home media is expected to grow by greater than 11% CAGR through 2031, so the company enjoys positive industry growth dynamics.

Roth Capital Partners is the lead underwriter, and IPOs led by the firm over the last 12-month period have generated an average return of negative (60.0%) since their IPO. This is a bottom-tier performance for all major underwriters during the period.

The primary risk to the company’s outlook is its shift from a subscription model for its ScreenPlay system to an advertising model through its Partner Network, which was just launched in May, 2022.

As for valuation, management is asking investors to pay an EV/Revenue multiple of 13.1x while the firm continues to generate high operating losses, a negative in the current market environment.

Like so many companies currently seeking to go public now, the firm is pricing its stock at $5.00, which means it is primarily aimed at retail investors.

While the low nominal price of the stock may attract day traders, the risk level of LPTV, which is transitioning its business and revenue model, is too high for my preference, so I’m on Hold for the IPO.