In this article, we want to shed light on a new Preferred Stock issued by Chicken Soup For The Soul Entertainment (CSSE).
Our goal is purely to inform you about the product while refraining ourselves from an investment recommendation. Even though the product may not be of interest to us and our financial objectives, it definitely is worth taking a look at.
The New Issue
Before we submerge into our brief analysis, here is a link to the 424B3 Filing by Chicken Soup For The Soul Entertainment, Inc - the prospectus.
For a total of 600,000 shares issued, the total gross proceeds to the company are $15M. You can find some relevant information about the new preferred stock in the table below:
Chicken Soup for the Soul Entertainment 9.75% Series A Cumulative Redeemable Perpetual Preferred Stock (CSSEP) pays a qualified fixed dividend at a rate of 9.75%. The new preferred stock carries no Standard & Poor's rating but is expected to be rated “BBB-” by Egan-Jones Ratings Company, and is callable as of 06/27/2023. Currently, the new issue trades at its par value at a price of $25.00 and has a 9.75% Current Yield and Yield-to-Call.
Here is how the stock's YTC curve looks like right now:
Chicken Soup for the Soul Entertainment, Inc., incorporated on May 4, 2016, is a provider of entertaining video content. The Company develops and produces exciting and entertaining, video content packaged for distribution through television, online and mobile channels, including: The Sip, Web series run on APlus.com, and A Plus videos. The Company’s video content projects include Chicken Soup for the Soul’s Hidden Heroes (Hidden Heroes), Chicken Soup for the Soul’s Project Dad, Paycation Homes, Hilton Grand Vacation Sips, Emily Griffith Technical College Sips, and American Humane.
The Company’s Hidden Heroes show is based in part on three Chicken Soup for the Soul books created with The Boniuk Foundation: Chicken Soup for the Soul: Be the Best You Can Be; Chicken Soup for the Soul: Create Your Best Future; and Chicken Soup for the Soul: Raising Great Kids. Each episode of Chicken Soup for the Soul’s Hidden Heroes features three segments that capture everyday heroes in action in an entertaining and interactive format.
The Company’s Dad project is a video content project show in which the camera follows three celebrity dads as they put their careers on the sidelines and get to know their children, resulting in a humorous look at the pitfalls and joys of being a father. The Company’s Paycation Homes show gives viewers the information and inspiration needed to realize their dreams of using real estate entrepreneurship to obtain financial success. Hilton Grand Vacation Sips which present more of the world’s inspiration in just one sip. These one-to-five-minute videos are quick, thought provoking snapshots intended to open the viewer’s eyes to awe-inspiring moments.
Source: Reuters.com | Chicken Soup for the Soul Entertainment
Below, you can see a dividend and profitability information about the common stock, CSSE:
...and the market opinion:
On August 17, 2017, was completed the IPO consisting of 2,500,000 shares of Class A common stock at an offering price of $12.00 per share. At this point, CSSE has not paid cash dividends or other distributions with respect to its Common Stock.
In addition, whit the market capitalization of around $103M, CSSE is the third smallest company in the 'Broadcasting - TV' sector' (according to Finviz.com).
Below you can see a snapshot of Chicken Soup for the Soul Entertainment's capital structure as of its last Quarterly Report in March 2018. You can also see how the capital structure evolved historically.
Source: Morningstar.com | Company's Balance Sheet
As of Q1 2018, CSSE had a total debt of $2M ranking senior to the newly issued preferred stock. The new Series A preferred shares rank junior to all outstanding debt and equal to the other outstanding preferred stocks. Heretofore this is the only preferred stock issued by the company.
Family and sector
As there aren't any other preferred stocks issued by CSSE and also there aren't any relative preferreds issued by other companies in the 'Broadcasting - TV' sector, I will compare the newly issued preferred stock with all outstanding high yield preferred stocks with no suspended distribution. As a "high yield" I will use these issues with a Nominal Yield of more than 9%.
Here is the full list:
Change of Control
Prior to June 27, 2023, upon the occurrence of a Change of Control, we may, at our option, redeem the Series A Preferred Stock, in whole or in part, within 120 days after the first date on which such Change of Control occurred, for cash at a redemption price of $25.00 per share, plus any accumulated and unpaid dividends to, but not including, the redemption date.
Use of Proceeds
We plan to use a portion of the net proceeds from this offering to fund growth initiatives and for working capital and general corporate purposes. In our discretion, we may use a portion of the net proceeds from this offering to fund repurchases of our stock in open market transactions in compliance with Rule 10b-18 promulgated under the Exchange Act and private transactions.
Addition to the S&P preferred stock index
With the current market capitalization of only $15M, CSSEP cannot be an addition to the S&P preferred stock index (NASDAQ: PFF).
This is an informational article about the new preferred stock CSSEP. With these articles, we want to pay attention to all new preferred stocks and baby bonds, and they are a good guide to what to expect from your income portfolio.
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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.