XLMedia: Cash Shell with $72.5 Million Cash and a $40 Million Market Cap

A really interesting cash play

Investment Report

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We are going to start writing about some event driven opportunities, these articles will be much shorter and will be in addition to the weekly deep dives on companies we publish.

1.    Opportunity:

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XLMedia presents an intriguing investment opportunity, combining a strong cash position with strategic asset sales aimed at unlocking shareholder value. With a market cap of about $40 million and cash holdings expected to be around $72.5 million, XLMedia is well-positioned financially, offering a solid foundation for potential returns to investors as the gap between the market capitalization and cash value of the company is pretty wide.

Central to XLMedia’s strategy is the sale of its North American business to Sportradar AG, which shareholders will vote on November 5. This sale could bring up to $30 million in cash, with $20 million paid upon completion and an additional $10 million contingent on the performance of the North American business by April 2025. This transaction values the North American assets at a multiple of 5.5 times their adjusted EBITDA, showing a calculated approach to maximizing shareholder value through asset sales. The sale follows an earlier disposal of XLMedia's European assets for $42.5 million, from which $30 million has already been received.

An additional benefit for shareholders lies in the earnout component tied to the European business sale. XLMedia expects to receive a final payment of $7.5 million along with an earnout of up to $5 million by April 2025, contingent on the European business’s performance. This earnout could further enhance XLMedia’s cash reserves, providing even greater potential for returns to shareholders.

XLMedia’s approach to asset divestitures is aimed at optimizing value while minimizing operating costs. Following the completion of both the North American and European sales, the company intends to operate as a cash shell, avoiding any new acquisitions or transformations into an investing entity. This streamlined approach allows XLMedia to preserve capital and focus on distributing available cash back to shareholders, a move that has already attracted significant institutional support. Two institutional funds, in particular, have almost doubled their positions in the company, with one increasing its stake from 3% to 9% and another from 5% to 7.6%, indicating strong confidence in the company’s strategic direction.

In total, the expected proceeds from the North American and European business sales, including potential earnouts, could bring XLMedia’s total cash from disposals to around $72.5 million. Based on current shares outstanding, this represents an implied gross value per share of approximately 21.2p—significantly higher than the pre-announcement share price of 6.6p.

The company by April of next year will have between 57.5 to 72.5 million dollars in distributable cash, if we subtract 5 million dollars in costs we will end up with a total cash balance of 52.5 to 67.5 million dollars by April 2025. We end up with an upside between 20% and 68% in less than a year and minimal risk.

2.    Catalysts:

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The main catalysts here are the AGM on November 7 and the announcement of the proposed distributions. If I had to guess, I’d expect we could see two distributions—one with the current proceeds and a second one with the proceeds from the earnouts plus the additional $5 million payment. This means we could potentially see a 19% return over a very short period, with an additional 40% return possible in less than seven months.

Disclaimer:

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The information provided in this article is for informational purposes only and should not be considered financial advice. The content does not constitute a recommendation to buy, sell, or hold any security or investment. Always do your own research and consult with a professional financial advisor before making any investment decisions. Investing in stocks involves risk, including the potential loss of principal. Past performance is not indicative of future results.