24/7 Real Media Lands Financing
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Ad server and network 24/7 Real Media looks to be back on track, bringing in at least $5 million in equity financing.
The New York-based firm secured an investment from Sunra Capital Holdings Limited, an investment vehicle advised by Merchants Group International, a San Francisco based investment firm.
In return, 24/7 Real Media issued $5 million in preferred stock. About a third of that is in Series A preferred stock that is convertible into common shares at $0.20535 per share. The remainder is nonvoting preferred stock, convertible into Series A stock upon approval by company stockholders during a meeting next quarter; or redeemable if stockholders nix the conversion.
Additionally, Sunra has the option of increasing its investment by an additional $2 million, which is also subject to stockholder approval.
Executives said the financing wouldn't be needed to help the firm reach breakeven in fourth quarter, but would provide extra growing space for the company -- and more confidence to investors and potential clients.
"As we continue to move toward break-even operating results, it has become clear that we are effectively executing on our turnaround strategy," said David Moore, chairman and chief executive of 24/7 Real Media. "This significant investment from a media-savvy, international investor is a tremendous validation of our strategy and provides the cushion we needed to be able to assure our investors, employees and customers that 24/7 Real Media will continue to be a leader in the online advertising industry for the foreseeable future."
The financing is good news, but getting to a stage at which the funds aren't desperately needed has been a hard road for 24/7 Real Media.
The firm recently concluded a period of major internal cost-cutting following the October merger of 24/7 Media and Real Media, which saw net losses drop from $36.1 million in fourth quarter to $3.7 million in first quarter. Pro forma losses decreased 68 percent from fourth quarter's $10.3 million loss.
During the cost-cutting, the company sold its e-mail list management and broadband businesses, and discontinued its legacy Connect ad server, all holdovers from its 24/7 Media days. In addition to streamlining its business, 24/7 Real Media has needed cash influxes from former Real Media parent (and minority shareholder) PubliGroupe.
"24/7 Real Media's senior management team has done a commendable job at weathering the past two years," Waechter said. "With the interactive advertising market beginning to recover, and after extensive financial, strategic, and technical due diligence, we feel that 24/7 Real Media represents a tremendous investment opportunity for us."
In addition to the preferred stock, 24/7 Real Media also said it issued five-year warrants to acquire up to 2.4 million shares of the company (worth about $714,000 at press time) at about $0.205 per share. Those include an immediately exercisable warrant for 780,000 shares. If shareholders approve the preferred stock conversion, Sunra can redeem a warrant to purchase an additional 1.6 million shares; should the conversion be voted down, Sunra will be able to exercise a warrant to purchase 1 million shares.