ChickenSoup Entertainment Is A Toxic Mess

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About: Chicken Soup for the Soul Entertainment, Inc. (CSSE), Includes: NNVC
by: Hindenburg Investment Research
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Summary

A charity that the CEO advises accounted for approximately 46% of 2016 revenue and 95% of 2015 revenue through “sponsorship” of the public entity’s television programs.

The charity was created in 2015, mere months after the creation of CSSE itself. The company later "donated" shares back to the charity. We have concerns about this relationship.

The company reported a change in accounting methodology the day of an announced acquisition, positioning it to record a dubious $22.2 million paper “gain on bargain purchase” from the deal.

CSSE is bizarrely structured as a subsidiary of a subsidiary and pays numerous fees to its affiliates. Public investors receive no proceeds from the popular book series.

The CEO of CSSE was formerly CEO of Winstar, a public company that declared bankruptcy amidst allegations of revenue falsification and accounting improprieties.

Introduction

ChickenSoup Entertainment (CSSE) raised $30 million in August 2017 via a crowdsourced IPO under the new Reg A+ framework, which has “lower[ed] regulatory hurdles for companies trying to go public”.

The