Digital music solutions group 7digital (LON:7DIG), one of the stock market darlings of August, capitalised on its enhanced share price to raise a further £6m through a discounted equity share placing this morning. These were issued this morning at 2.25p per share. This is a discount on the 2.95p at which 7digital shares closed on Wednesday.
7digital says it is going to use the net proceeds to support commercial growth opportunities within the home fitness, artist monetisation and social media markets.
7digital rewarded its investors in August when shares spiked from 0.4p on 10 August to the curret price of 2.62p at the time of writing. However, the stock has come off its peak of around 3.2p. There is obviously some profit taking going on.
“This financing not only offers us greater investment and support to fully capitalise on these trends, but an entrepreneurial environment to leverage our leading technology platform to support new models of music consumption that emerge,” said 7digital CEO Paul Langworthy.
7digital: end to end digital music
7digital is a technologgy company that delivers end to end digital music including an integrated platform that provides content, data and services that can help companies to engage and monetise audiences, at scale if needed. It first attracted attention when it announced it had signed a contract with Triller Inc, an AI-powered app that helps users to create professional quality videos and share them on social media.
There was further excitement around 7digital stock in mid-August when it was rumoured that US President Donald Trump had opened an account with Triller. This was amidst speculation that Triller might be in line to replace TikTok in the US market.
7digital has also hinted at a further deal with an as yet unnamed global technology company that will use 7digital’s platform to access music from rights-secured labels. This new deal also includes tracking and reporting.
7digital has not reported any results since January, although it is due to report this month.
Opportunities created by TikTok’s problems?
The rapid rise in the price of 7digital shares has prompted a lot of interest in the stock over the past few weeks. The problems associated with TikTok and the potential this creates for a platform like 7digital is rightly generating a lot of excitement. When a market leader runs into problems – albeit of a political nature in this case – there are always opportunities for a smaller player to make money.
That said, 7digital has not actually made any profits yet. Investors have yet to be able to assess the impact of the pandemic on the company’s financials. It threw out a 1H 2019 operating loss of £2m, BUT that was well before the slew of deals announced in August, so it’s all to play for now.
This looks to us like a highly speculative play, but there is renewed opportunity here to get into it at a discounted level as the shares sell off a little. 7digital seems extremely well-placed to benefit from some big changes in the way music and video is managed and distributed in the new economy.
We are probably most interested to know whom it has signed its latest commercial agreement with. This one for our small caps watch list, but we do expect to see a lot of volatility from this stock in the near term. Cheaper opportunities could be available in the short term.
Story updated to reflect closure of placing.