BEVERLY HILLS, Calif. - Kartoon Studios Inc. (NYSE American: TOON), a prominent player in the entertainment industry, has announced a registered direct offering aimed at raising approximately $7 million. The offering includes up to 7 million shares of common stock and/or pre-funded warrants to purchase shares of common stock, with institutional investors as the targeted buyers.
The first tranche of the offering is set to consist of 4 million shares and/or pre-funded warrants, with the expectation to close by Monday, April 22, 2024. This initial part is projected to generate roughly $4 million in gross proceeds for Kartoon Studios, before accounting for placement agent fees and other related expenses.
Investors participating in this offering will also have the option, for up to 180 days after the securities purchase agreement (SPA) date, to acquire an additional 3 million shares and/or pre-funded warrants. This could potentially bring in another $3 million in gross proceeds for the company.
EF Hutton LLC is serving as the exclusive placement agent for the offering. The sale of securities will be conducted pursuant to a shelf registration statement on Form S-3, which was effectively filed with the U.S. Securities and Exchange Commission (SEC) on December 22, 2023, and declared effective on January 5, 2024.
The offering will be made available only through a prospectus supplement and accompanying prospectus, which are part of the effective registration statement. Prospective investors can obtain these documents via the SEC's website or directly from EF Hutton LLC.
Kartoon Studios is known for its comprehensive involvement in the creation, production, distribution, marketing, and licensing of entertainment brands. Its intellectual property portfolio boasts original animated content, including projects associated with Stan Lee and other notable figures.
The company has expanded its reach by acquiring Canada's WOW! Unlimited Media and investing to become the largest shareholder in Germany's Your Family Entertainment AG. Kartoon Studios also operates Toon Media Networks, which includes Kartoon Channel!, Frederator Network, and Ameba, covering a wide range of digital distribution channels.
The information in this article is based on a press release statement from Kartoon Studios.
InvestingPro Insights
Kartoon Studios Inc. (NYSE American: TOON), while seeking to raise capital through a direct offering, shows a challenging financial landscape, according to recent data from InvestingPro. The company's market capitalization stands at a modest $52.23 million, reflecting the size and current investor valuation of the business. Despite a strong return over the last month of 13.85% and an even more impressive three-month return of 26.5%, the company's stock price has experienced significant volatility and a notable decline over the past year, with a -48.25% return. This volatility could be a concern for potential investors considering the direct offering.
One of the InvestingPro Tips highlights that Kartoon Studios is quickly burning through cash, which aligns with the company's reported negative operating income of -$27.38 million for the last twelve months as of Q4 2023. This cash burn rate could be a factor driving the need for the capital raise. Moreover, the company does not pay a dividend to shareholders, which may be a consideration for income-focused investors.
On a brighter note, another InvestingPro Tip points out that Kartoon Studios' liquid assets exceed its short-term obligations, suggesting that the company is in a position to cover its immediate liabilities. This could provide some reassurance to investors concerning the company's short-term financial health.
For investors seeking a more comprehensive analysis, InvestingPro offers additional insights and metrics on Kartoon Studios, including an InvestingPro Fair Value estimate of $2.08 USD, which may guide investors on the potential value of the stock. To explore these insights further and access a total of 12 InvestingPro Tips for Kartoon Studios, visit https://www.investing.com/pro/TOON and remember to use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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