Stingray: The Solution To Obsolescence Is Not Acquisitions

Summary

• Stingray has made 35 acquisitions totaling $756 million. My analysis indicates that they have either generated far less EBITDA than guided, or the base business is in serious decline.
• Stingray appears to utilize aggressive addbacks in its presentation of Adjusted EBITDA, rendering it 52% higher than my estimate of run-rate EBITDA.
• Stingray's recent acquisition of Newfoundland Capital takes leverage to 4.8x. Free cash flow will be negative with the new debt burden, potentially rendering dividend at risk in the future.
• The tipping point may be an existential threat from the generational shift of Canadian cablecos to an IPTV platform. Stingray's linear music channels are typically included in the lowest cost TV packages. This may no longer be the case with IPTV.
• Recommend that investors SELL their Stingray shares with downside of 30-85%.

Summary Investment Thesis

Stingray Digital Group (RAY.A, or the “Company”) offers potential downside of 30%-85% from its current price of $7.43. My analysis of Stingray’s historical acquisitions and their contribution to EBITDA indicate the company has either paid substantially more than the 4x-6x EBITDA multiples communicated to the market, and/or its base business is in serious decline. In the face of a potentially declining base business, Stingray has become increasingly aggressive with respect to addbacks in financial metrics presented to investors, to the point where the Company’s Adjusted EBITDA is 52% higher than my estimate of run-rate EBITDA.

On top of negative headwinds from macro level trends of pay TV ‘cord-cutting’ and ‘cord-nevers’, Stingray faces the additional existential risk of being left behind in a generational shift of major Canadian cablecos as they deploy the Comcast Xfinity X1 IPTV platform in the next few years. RAY’s traditional curated music channels were typically included in every base cable TV subscription. It appears that these linear channels may not be included in even higher priced IPTV packages, which could result in significant reductions in Stingray’s reach. In an age where consumer tastes are quickly evolving, RAY’s traditional linear TV music channels are likely to be viewed as obsolete. This appears to be happening as we speak, as a review of Roger’s Ignite TV product indicates that Stingray’s traditional music channels are not currently included in any of the IPTV packages.

In light of these difficulties, Stingray doubled-down by acquiring a Canadian radio operator for 10.5x EBITDA, which is almost twice the implied valuation of the target’s closest competitor. Stingray has stretched its balance sheet to 4.8x leverage in order to accommodate this acquisition (and potentially increasing to 5.1x pending additional proposed acquisitions). Proforma Stingray will not have a path towards deleveraging as the entity will generate negative free cash flow.

The unfolding story is very similar to the fate of Mood Media, another Canadian B2B distributor of music which ultimately ended up in CBCA/Chapter 15 restructuring.

I recommend investors SELL their Stingray shares. For investors looking to short the stock, borrow is plentiful at an indicative cost of 0.50%.

All figures in CAD unless otherwise stated

Company Description

Stingray is a Montreal-based provider of B2B music solutions through a number of platforms including digital TV (linear music channels), satellite TV, internet, and mobile devices. The Company also provides commercial music solutions in 156 countries through 74,000 commercial establishments including DJ and karaoke products. Stingray was founded in 2007 by current CEO, Eric Boyko.

Stingray Has Engaged In An Acquisition Binge Since Inception

Stingray has marketed itself as a free cash flow generating company that makes acquisitions (i.e. a classic rollup story that creates value through synergistic acquisitions). Since the Company’s inception in 2007, it has completed 35 strategic acquisitions totalling $756 million. These acquisitions have spanned the globe, from Australia to Switzerland to Canada.

Source: 2018 AIF

The largest acquisition in Stingray’s history occurred earlier this year when it acquired radio station operator Newfoundland Capital (“NCC”) for $506 million. I will discuss in greater detail issues related to this acquisition later in this report.

I have reviewed public press releases for Stingray’s previous acquisitions and, where available, I have shown the disclosed transaction price. Please note that the $756 million in total acquisitions excludes the announced acquisitions of Music Choice and DJ-Matic.

Stingray Claims to Make Acquisitions at 4-6x EBITDA

During conference calls, Stingray’s management claims to be acquiring companies at 4x-6x EBITDA (pre-synergies) and acquiring $5-$10 million of new EBITDA annually.

Source: Q3 2016 Call Transcript accessed from Bloomberg

Source: Q1 2017 Call Transcript accessed from Bloomberg

Source: Q4 2017 Call Transcript accessed from Bloomberg

Although management at Stingray take every opportunity to discuss the global brand they are building and their acquisition prowess, I would argue that the Company’s historical acquisitions appear to have been value destructive for shareholders. If I exclude the NCC and Quello acquisitions (these occurred in Stingray’s fiscal year 2019), I estimate Stingray has spent ~$236 million in acquisition capex since 2007 and ~$28 million on other capex from 2013-2018. Stingray’s acquisitions have had many years to mature and therefore generate a rate of return for the Company. However, when I total historical spend and compare this spend to 2018 net income, I estimate Stingray has generated a <1% rate of return on its acquisition and capex spend.

My Analysis of Historical Acquisitions Implies Either Multiples Paid Were Higher, or Base Business in Decline

While management has stated its 4x-6x acquisition metrics on numerous occasions, the numbers do not appear to corroborate their claims. If I assume zero organic growth, zero synergies, the mid-point of the 4x-6x acquisition multiple range and a 9.6x acquisition multiple for NCC (as stated by Stingray management excluding synergies), I estimate Stingray should be generating ~$103 million of proforma EBITDA in 2018 (including NCC). However, I estimate the Company will only generate ~$80 million in proforma EBITDA – meaning that ~$23 million of EBITDA is essentially “missing”. This exercise also assumes there was zero base business to begin with (i.e. Eric Boyko has created and grown Stingray exclusively through acquisitions).

This analysis leads to a number of questions:

1. What are these businesses Stingray is acquiring?
2. What are the real valuations being paid for these businesses?
3. Is Stingray’s base business deteriorating at such a pace that acquisitions are only able to offset a portion of the declines?

Source: Company Reports and Author’s Estimates

The Company Makes Recurring Adjustments to EBITDA

Since its IPO, Stingray has been consistently making significant adjustments to EBITDA and net income. These adjustments have resulted in management’s adjusted financial results differing materially from those in the audited financial statements.

After careful review, I believe that there are three sets of adjustments/addbacks that I disagree with:

1. Share-based compensation: this is a real expense for shareholders as it leads to dilution;
2. Restricted, performance and DSU: same as above; and
3. Acquisition, legal fees, structuring, and other: Stingray’s acquisition, legal structuring and other catch-all bucket has grown in size from $0.3 million in 2013 to $10.6 million in 2018. This line item is not one-time, but rather a recurring and growing expense.

In the below exhibit, I compare my estimate of adjusted EBITDA to that of the numbers reported by Stingray. Since 2013, Stingray’s Adjusted EBITDA was, on average, 26% higher than my calculation. More importantly, the divergence between the Company’s Adjusted EBITDA and my estimate of adjusted EBITDA has been increasing at an alarming rate. In 2018, Stingray’s reported adjusted EBITDA was 52% higher than my estimate.

Why are these EBITDA differences important?

1. Sell-side analysts value Stingray based on EV/EBITDA multiples and tend to take the Company’s reported Adjusted EBITDA at face value (i.e. with all the addbacks). As a result, the base financial metric sell-side analysts are utilizing to derive their price targets is potentially skewed too high.
2. The underlying EBITDA multiple being utilized is also potentially flawed as it is based on the perception that Stingray is generating organic growth and synergies from these acquisitions. Since 2013, the Company’s presented Adjusted EBITDA results imply a CAGR of ~16%. However, my adjustments derive an EBITDA CAGR of 8%. Furthermore, I estimate all of this growth has come from acquisitions and that the base business is generating zero organic growth (and is perhaps declining).

The hypothesis that Stingray is possibly generating zero/negative organic growth has implications on the Company’s free cash flow profile as well. I believe that Stingray’s capex number should include acquisition spend, since acquisitions appear to be required to maintain the company’s run-rate of EBITDA. In conference calls, management points to Stingray’s free cash flow generation and Eric Boyko even stated on the Q3 2017 call that he estimates it to be $28-$30 million.

Source: Q3 2017 Call Transcript accessed from Bloomberg

Once again, I believe this level of earnings/cash flow generating power is overstated. If one includes acquisitions, Stingray burned $22 million of free cash flow in 2018 alone, and has burned $63 million cumulatively since 2013. This is materially below the run-rate $28-$30 million stated by management.

NCC Acquisition Appears Expensive, Significantly Increases Leverage, and Does Not Result in RAY Having Positive Free Cash Flow

As previously mentioned, Stingray announced its intention to acquire Newfoundland Capital in May 2018 and closed on the acquisition in October 2018. NCC operates 68 radio stations in Canada spanning 7 provinces. This acquisition marked a significant turning point for Stingray for a number of reasons:

1. A marked change in business model from a B2B music delivery company, to predominantly a radio broadcasting company.
2. The market did not approve of the acquisition and investors have voted with their feet. To partially pay for the acquisition, Stingray issued subscription receipts at $10.40 per receipt which converted to Stingray shares upon closing of the transaction at Stingray’s prevailing price (Stingray’s previous day close was $10.78). With Stingray currently at $7.43, the stock is ~29% below its pre-NCC announcement level.
3. Stingray has taken on a significant debt in order to pay for this acquisition at a questionable time in the interest rate cycle.

In its public disclosures, Stingray states that the acquisition price (i.e. enterprise value) of NCC was $506 million. However, in its regulatory approval release, the Canadian Radio-television and Telecommunications (“CRTC”) body stated that the acquisition price was $523.9 million as Stingray did not account for leases in its calculation. Furthermore, in order to attain CRTC approval, Stingray agreed to provide a $31 million tangible benefits package which I believe should be included in the acquisition price. Putting it all together, I estimate Stingray paid $555 million for NCC or 10.5x EBITDA. In my opinion, Stingray grossly overpaid for these declining radio assets.

Source: Broadcasting Decision CRTC 2018-404 (October 23, 2018 Approval)

Source: Broadcasting Decision CRTC 2018-404 (October 23, 2018 Approval)

On October 25, 2018, John Steele (part of the Steele family that controlled NCC), gave an interview to the CBC. There were interesting quotes from this article that pointed to NCC’s challenges that Stingray paid a hefty price to inherit:

Despite that growth, Steele acknowledged the Canadian broadcasting industry has become tough in recent years, to the point his family felt unable to go on.

...

"The media landscape is getting very challenged,” he told CBC Radio’s St. John’s Morning Show.

Source: CBC

My read from the article is that the Steele Family was very happy to walk away from the challenging Canadian radio business and sell NCC to Stingray for 10.5x EBITDA.

Corus is the best public comparable for NCC as it operates 39 radio stations across Canada. In deriving their valuations for Corus, sell-side analysts apply an average EV/EBITDA multiple of 5.8x for Corus’s radio assets. These applied multiples are approximately 50% lower than the multiple Stingray paid for substantially similar assets.

Source: May 2, 2018 NCC Acquisition Presentation

Based on the valuation sell-side analysts apply to Corus, I believe Stingray overpaid for NCC by $248 million (on top of the balance sheet erosion due to the proforma debt load). This amount is substantial, as it equates to 40% of Stingray’s market capitalization prior to the announcement.

Given the growth profile (or lack thereof) and hefty multiple, why would Stingray make such an acquisition? I believe this acquisition was needed to replenish declining free cash flow generation within the base business. Traditional radio is a reasonable business (currently) with limited capex requirements and high EBITDA to free cash flow conversion. Let us investigate if this will be the case.

Stingray’s Leverage Will Be Significantly Higher Post Acquisition

In order to finance the acquisition, Stingray took on significant debt. In the acquisition presentation, Stingray claims proforma leverage will be 3.6x. However, I estimate proforma leverage (on an EBITDAR basis adjusting for operating leases) is significantly higher at 4.8x (and potentially over 5x pending the acquisition of Music Choice if wholly debt financed).

Source: May 2, 2018 NCC Acquisition Presentation

Source: 2018 AIF

Free Cash Flow Appears To Be Breakeven to Negative Even Assuming Full Cost Synergies

CEO Eric Boyko’s rationale for the acquisition of NCC was that it will boost free cash flow generation. In fact, he stated on the Q4 2018 call that Stingray’s proforma free cash flow will be $1.00 per share (equates to ~$74 million annually).

Source: Q4 2018 Call Transcript accessed from Bloomberg

While the rationale for the acquisition makes sense on the surface (i.e. NCC’s radio assets generate significant free cash flow), the numbers, do not substantiate management’s claims as proforma Stingray will only be free cash flow positive by a small amount. After factoring in dividends, I estimate proforma Stingray will be free cash flow breakeven to negative. Put another way, Stingray will not be in a position to pay down debt and/or reduce leverage. Furthermore, with its share price down 29% since the NCC acquisition announcement and sentiment continuing to decline on the name, I do not believe Stingray has easy access to equity capital markets in order to reduce leverage.

As shown above, Stingray issued $180 million of equity in order to pay for the $506 million NCC acquisition. This $180 million of equity was essentially the maximum amount of equity Stingray could have raised given the $83 million in public subscription receipts were poorly received by the market. Eric Boyko admitted as much to this fact on the Q4 2018 conference call. In other words, it appears that Stingray is tapped out of the equity markets.

Source: Q4 2018 Call Transcript accessed from Bloomberg

The question becomes: Why did NCC choose to take so little Stingray equity as part of the transaction consideration? Of the total consideration, ~92% was in the form of cash and just ~8% was in the form of Stingray shares.

Source: 2018 Annual Report

The Steele family is intimately familiar with Stingray. In fact, Robert Steel has been a board member at Stingray since April 2015 (just prior to Stingray’s IPO). The Steele family owned 87% of NCC and likely could have dictated terms of the transaction (i.e. if Robert Steele and the family wanted more Stingray equity as considerations, Stingray would have likely been happy to comply and raise less public equity at a discount). Despite barely owning any existing shares of Stingray (he does not meet share ownership targets as described in the management information circular), Robert Steele and the rest of the Steele family opted to take 92% of their share of the consideration in cash, which equates to over $316 million. Also keep in mind that by taking cash consideration, the family would likely have triggered a significant tax bill which could have been deferred by accepting stock. Even accounting for the private placement of shares to Harry Steele on November 5^th worth $24 million, the Steele family took $292 million off the table in this transaction.

Why Is the Pace of Acquisitions Increasing Now?...

Stingray has been an active acquirer since its founding, but the scale and scope of acquisitions has increased materially over the last 12-months. The questions is why? I believe that the base business is under existential threat and management needs to quickly replace the EBITDA under threat. I believe Stingray’s most profitable business continues to be the Galaxie music channels that it purchased from CBC in 2009 for $65 million. These channels are distributed through Canadian cablecos and telecos (offered on most basic bundles) and Stingray receives monthly subscription fees from the service provider (with likely very high EBITDA margins). According to an analyst comment, the monthly APRU generated from these channels is approx. $0.20.

Source: Q4 2018 Call Transcript accessed from Bloomberg

The existential threat facing Stingray’s music channel business comes in the form of cable evolution. Most of Canada’s cablecos are transitioning to Comcast’s Xfinity X1 service. Xfinity X1 is an IPTV based set-top box service, and is being licensed by Rogers, Shaw and Videotron in Canada. This is widely regarded as a very important shift for the cable industry, with the Xfinity X1 platform offering technologies such as modern interface for TVs and mobile devices, voice recognition and control, artificial intelligence, integration of Netflix and over-the-top services, on-screen apps that deliver real-time tracking of sports scores and stats, and customizable parental controls.

… Next-Generation TV May Result in Stingray’s Obsolescence

The problem is that Xfinity does not appear to currently carry Stingray’s music channels on its platform. This makes sense, as there are cheaper and easier ways to access music through an IPTV platform than paying Stingray $0.20/month for each and every subscriber on the system.

For example, on Roger’s traditional linear TV product, Stingray’s full range of music channels are included even on the cheapest monthly package of $24.99, as seen below:

Source: Rogers Traditional TV Packages

However, when searching on Rogers Ignite (the new Xfinity X1 IPTV platform), I found that none of Stingray’s music channels are offered (though the video channels acquired from Bell for $4 million in 2016 are available).

Source: Rogers Ignite (Xfinity product) Packages

Over time, Rogers will transition more and more of its subscribers to its Ignite IPTV service, and Shaw and Videotron will likely follow suit in the rest of the country. As a result, I believe Stingray is set to see its once very profitable music channel business face significant erosion. In the near future, I estimate the EBITDA contribution from Stingray’s music channels is set to decline by ~$10 million which equates to ~36% of the company’s adjusted EBITDA in 2018 (my estimates). Stingray may know this threat is on the horizon and has therefore decided to get ahead of it by attempting to diversify into other lines of business.

DJ-Matic Acquisition Appears to Have Significantly Lower EBITDA Than Analysts Suggest

On October 12^th, Stingray announced the acquisition of a Benelux-based company called DJ-Matic. The press release claims that DJ-Matic “adds 10,000 locations” to the overall company.

Source: Stingray October 12, 2018 Press Release

The acquisition price was disclosed in Stingray’s Q2 2019 earnings report as EUR10.8mm, or CAD$16.3mm.

Source: Q2 2019 Earnings Report

Multiple analyst reports stated that DJ Matic was acquired for ~4x EBITDA, which is information analysts likely received from discussions with Stingray management:

Source: BMO Research Report

Source: NBF Research Report

With a purchase price of EUR10.8 million, a 4x EBITDA multiple would imply EUR2.7 million of EBITDA. I did some digging in an attempt to corroborate this information.

It turns out that DJ-Matic NV has filed financial statements, which are available online in Dutch. I then used Google Translate to translate the statements to English. I will of course, readily admit that there very well could be errors in this machine translation, although the numbers should not change.

The financial statements show that Kris Gryspeert is a Managing Director which aligns with Stingray’s press release.

Source: DJ-Matic NV 2017 Financial Statement accessed from Companyweb

Source: Google Translation of DJ-Matic NV 2017 Financial Statement

DJ-Matic’s Dutch financials paint a very different picture of its profitability relative to the figures implied by sell-side analysts.

Source: Google Translation of DJ-Matic NV 2017 Financial Statement

Working through the financials, I calculate that DJ-Matic generated ~EUR0.4 million of EBITDA in each of 2016 and 2017 which is substantially lower than the EUR2.7 million that would be implied at a 4x acquisition multiple. Put another way, I estimate Stingray paid 27x EBITDA for DJ-Matic.

Source: Google Translation of DJ-Matic NV 2017 Financial Statement and Author’s Estimates

Another interesting piece of information is the workforce breakdown. The financials indicate that DJ-Matic had 13.6 full-time equivalent employees (“FTEs”). Stingray’s press release stated that the acquisition of DJ-Matic “adds 10,000 locations” to Stingray’s existing customer base. If I assume each of the 13.6 FTEs is a customer service representative, it would imply each employee services 735 customers.

Source: Google Translation of DJ-Matic NV 2017 Financial Statement

DJ-Matic’s Online Presence Raises Further Questions

A quick examination of DJ-Matic’s online presence raises further questions about the business beyond the discrepancy in financial results. First, it appears that DJ-Matic’s Twitter account has been dormant since 2014:

Second, DJ-Matic’s website for their “Boxy” product shows them as having three locations, including one in London, U.K.:

Source: DJ-Matic website

Interestingly, when I Google search this address, it shows up as a banquet hall/wedding venue that is available for rent:

Source: Westminster Venue Collection

I find it very odd that a company that should be fairly tech ‘savvy’ given the nature of its business would not keep its online presence up to date.

Proposed Acquisition of Music Choice Has Questionable Motivations

In August 2018, Stingray announced it had made an unsolicited offer to acquire Music Choice for US$120 million. Music Choice produces music programming and music-related content for digital cable television and mobile users. Music Choice is a general partnership with unitholders consisting of Charter Communications, Comcast, Cox Communications, Sony, WarnerMedia, Arris and Microsoft.

Sell-side analysts greeted the Music Choice offer positively as they viewed this potential transaction as being very synergistic and only marginally dilutive to leverage. This positive view was reflected in the share price which moved higher by 6% on the news.

Source: NBF August 7, 2018 Report

Assuming Music Choice were to be acquired at 7x EBITDA, I estimate proforma leverage will increase to 5.1x. This leverage level is dangerous for a company that generates negative free cash flow after dividends and is in a declining business. Furthermore, I pose two questions:

1. How will Stingray actually pay for the Music Choice transaction? Stingray has no access to equity markets and I suspect banks (including National Bank who provided the $450 million facility to acquire NCC) would be very hesitant at this point to lend additional capital to a Company that announces new acquisitions weekly (with the quantum of acquisition sizes increasing).
2. Why would savvy companies such as Charter Communications and Comcast sell Music Choice for 7x EBITDA if it were such a phenomenal asset?

I believe Stingray has made the purchase offer out of desperation to prevent Music Choice from encroaching upon their base business. In its 2018 AIF, Stingray disclosed that Music Choice has made overtures to “certain Canadian broadcasting distribution undertakings (“BDUs”) involving particularly aggressive pricing tactics tantamount to dumping.” Music Choice is attempting to enter the Canadian market and capture a piece of Stingray’s cable TV business. Why would Music Choice enter the Canadian market, only to agree to a sale a few months later at 7x EBITDA? My best guess is that either Stingray is going to end up paying substantially more than their initial offer or that Music Choice unitholders are selling Stingray a lemon (i.e. Music Choice’s “dumping” strategy was executed to force Stingray’s hand). Either way, contrary to sell-side analysts’ opinion, I do not believe this transaction is positive for Stingray shareholders.

Source: Stingray 2018 AIF

Recall The Demise of Mood Media: Another Canadian Purveyor of ‘Elevator’ Music

The Stingray situation reminds me of another Canadian company, Mood Media (“Mood”). Mood was founded in 2004 and was a provider of specialty music services. As stated in its AIF in March 2010, Mood generated “revenue by selling its background music and messaging service to its customers, and by selling its specialty music compilations through its media partners.” The music distribution business models between Stingray and Mood are quite similar. In fact, Stingray acquired certain assets from Mood Media in 2014 (i.e. DMX Canada and DMX LATAM).

Both Stingray and Mood were acquisition focused companies. In the same 2010 AIF, Mood stated “the Company’s business strategy includes growth through business combinations and acquisitions.” During the period from 2004 to 2010, Mood grew through smaller acquisitions including Trusonic and Somerset Entertainment. This culminated in March 2011 when Mood announced a transformational acquisition of Muzak for US$345 million.

Muzak was the turning point for Mood. The acquisition was funded entirely with debt and took headline leverage from 2.0x to 4.4x. In its 2013 AIF, Mood stated “the Company has achieved 100% of its targeted cost synergies from its acquisition of Muzak.” However, cash flows from this acquisition never materialized, earnings never materialized, and Mood was weighed down by its debt load. Mood was eventually acquired by GSO Capital Partners and Apollo for $0.17 per share (down 94% from the time of the Muzak acquisition). Mood ultimately commenced Canada Business Corporation Act (“CBCA”) proceedings and filed petitions under Chapter 15 of the US bankruptcy code.

Source: Bloomberg and Author’s Estimates

What Are Stingray Shares Worth?

There are five analysts from Canadian banks that cover Stingray in Canada, all of whom have the exact same $11.00 price target. On average, the sell-side community derive their price targets by applying a 12.2x EBITDA multiple to the base Stingray business and 7.8x EBITDA multiple to NCC (despite applying a 5.8x average multiple to Corus’s radio business).

My valuation differs materially from Street target prices as I believe Stingray:

1. Does not appear to generate organic growth based on historical analysis of acquisitions and the lack of associated revenue/EBITDA;
2. Is burning free cash flow after deducting required interest service costs from its new debt burden;
3. Is even more levered than first appears after adjusting for operating leases and required investments, at 4.8x EBITDAR;
4. Is facing headwinds from macro level trends of TV ‘cord-cutting’ and ‘cord-nevers’;
5. Is also facing a potential existential threat from the generational shift of Canadian cablecos to IPTV and the uncertainty of whether or how their myriad number of channels will be included in basic packages;
6. Appears to have made a questionable acquisition in the form of DJ-Matic NV;
7. Appears to be following a similar path as fellow Canadian B2B music purveyor Mood Media.

Interestingly, Stingray’s internal valuation methodology to value CGU’s utilizes a 12% WACC (which effectively equates to an 8.0x EBITDA multiple). In my opinion, 8.0x EBITDA multiple, while still high, is far more reflective of Stingray’s base business value versus the 12x-13x multiple sell-side analysts have anchored to since the IPO.

Source: Stingray 2018 Annual Report

After applying reasonable multiples to Stingray’s base business and NCC, I estimate Stingray shares are worth $1.13-$5.19, which represents 30%-85% downside from current levels. I believe Stingray made the mistake of overpaying for a large-scale acquisition and utilizing significant amounts of debt at the peak of the cycle. I believe this decision could prove fatal and could result in a similar outcome to Mood Media. I recommend investors SELL shares of Stingray.

Analyst’s Disclosure: I am/we are short RAY/A. 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.

ALL READERS SHOULD PERFORM THEIR OWN DUE DILIGENCE. This article represents the opinions of the author only, as of the date of this article. The author makes no representation as to the accuracy or completeness of the information set forth in this article and has no duty, express or otherwise, to update the contents herein. The author may also cover his/her short position at any point in time without providing notice to readers. The information set forth in this article does not constitute a recommendation to buy or sell any security. This article contains certain "forward-looking statements," which may be identified by the use of such words as "believe," "expect," "anticipate," "should," "planned," "estimated," "potential," "outlook," "forecast," "plan" and other similar terms. All are subject to various factors, any or all of which could cause actual events to differ materially from projected events. This article is based upon information reasonably available to the author and obtained from sources the author believes to be reliable; however, such information and sources cannot be guaranteed as to their accuracy or completeness. Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.