FuboTV Inc. (NYSE: FUBO) has a market cap close to $4.0 billion and is quickly evolving as a streaming powerhouse. One of the little-known assets sitting quietly in the background is Pulse Evolution (OTCMKTS: PLFX) which is a majority-owned (60%) subsidiary of FUBO.
This majority interest in Pulse Evolution was purchased by Evolution AI for $200 million of what is ultimately FUBO stock in June 2018. The CEO of Evolution AI at the time of the tender offer was Jordan Fiksenbaum, an entertainment veteran with over 30 years of industry experience. The tender offer for pulse stock was $.83 for restricted common stock and $1.10 for unrestricted common stock. PLFX was recently trading for $.10/share just two weeks ago.
In essence, FUBO owns the assets that have the technology to make digital humans which includes Michael Jackson’s, Marilyn Monroe, Elvis Presley, and Floyd Mayweather’s digital likeness. The question investors should be asking is what is the plan for Pulse Evolution and how will it affect FUBO?
Plan Evolving – Rebooting Pulse Evolution
Detailed in an 8-K filed on March 8, 2021, Jordan Fiksenbaum resigned his position as president of FuboTV and immediately transitioned into a consulting role with the majority-owned company Pulse Evolution Corporation. The next 8-K on March 18, 2021, got into the rationale behind the resignation.
Looking at the language of this 8-K there is an “amicable alignment of his post-merger current responsibilities to his role.” Years ago Fiksenbaum was brought in to lead Pulse Evolution to the next level using his entertainment contacts. His skill set is more effectively used as the head of Pulse Evolution than as a president within FuboTV.
Within this 8-K was a very generous compensation package of $300K over the course of the next 12 months. This agreement was most likely what he needed to reboot the company.
There are many synergies between FUBO and sports. For example, if the digital likeness of boxing legends like Muhammad Ali, Mike Tyson, Evander Holyfield, Sugar Ray Leonard, or Floyd Mayweather were captured and broadcast as a live event where no one knew the results of the match, it could lead to record revenues. This was announced in April 2020. Regardless of what the new direction is, the one clear signal from FUBO is that they want to do something with the asset.
Future Funding of Pulse Evolution
Detailed in FUBO’s 10-Q show only one Note Payable and it happens to be linked to Evolution AI which is now a majority-owned company of FUBO. A merger with After August Inc. was struck on February 27, 2016, and consequently closed by April 20, 2016.
The terms of the deal called for $300K in cash at closing and a 3-year $2.7 million promissory note secured by the intellectual property and 4.8 million shares of PLFX stock. That note has grown to $4.7 million in value. The holders of the CAM Digital Note entered into a forbearance agreement which prevents them from exercising their default provisions under the agreement.
If the company is going to reboot this note might seriously consider settling this otherwise Fiksenbaum might potentially have no technology to work with if the forbearance agreement expires. As the 10-Q says they are negotiating to resolve the matter. So the next disclosure item could be an 8-K with the payment or settlement of debt because FUBO stock is very liquid and they have over $450 million in cash. This strong balance sheet also enables them to fund the projects. Using the financial resources of FUBO makes the most sense.
The other option could be the eventual spinoff of the asset. This is tricky because it’s a majority-owned company, not a wholly-owned company. They still have 40% of PLFX shareholders to contend with and those are shareholders that didn’t tender their shares at $1.10 years ago believing the value was higher, which means they would have to strongly consider raising their tender offer price.
Given FUBO’s public offering price was $10.00 and these shareholders missed out on the potential, it is reasonable for them to offer triple the last tender price or $3.30/share. Shareholders of PLFX might also be offered shares in FUBO. There are a lot of potential scenarios but time is not on Fiksenbaum’s side because if he builds it then there’s a really good chance he will have to pay more for what he’s planning on building.
The cap structure hasn’t changed since the company’s last reported 10-Q for March 31, 2019. At that time the company had 265,927,541 shares. In May 2019 the company announced that the newly merged company that had 60% of PLFX had nearly $270 million in shareholder equity which suggested a shareholder equity price of $1.00/share.
Additionally, they announced that all the convertible debt was repaid leaving no convertible debt on the books and a clean balance sheet. Their assets include the library of digital likeness and of course the production and royalties from the ABBA tour.
ABBA Tour in 2022
In September 2020 ABBA reunited in West London to film their 2022 hologram tour at Ealing Studios. The pandemic definitely delayed their planned tour. The 2022 launch corresponds with their 50th anniversary as a band. The tour was originally announced in 2016, but the technology behind it wasn’t revealed until 2018 when Simon Fuller announced the collaboration with Pulse Evolution. In 2019 ABBA planned to launch 2 brand new songs for their virtual tour, but that increased to 5 new songs in 2020 and they include ‘I Still Have Faith In You’ and’ Don’t Shut Me Down.’ In April 2021 Björn Ulvaeus said in The Times interview that the tour was proceeding and that “One of them is a pop tune, very danceable.”
Jordan Fiksenbaum – Officer & Director of Pulse Evolution
Jordan is an entertainment industry veteran. He is well known for his involvement in Cirque de Solei. Over the past 30 years of his career, he has booked over $5.0 billion in sales. His special skill set has been his vision to build a complete brand using sponsors and branding opportunities. In terms of operational skills, he was widely successful in finding sponsors and negotiating with artists and venues.
There is about a year until the ABBA launch and hundreds of millions in revenue potential at stake which is the most likely explanation why Fiksenbaum stepped back up to the role at PLFX.
This investment boils down to speculation that FUBO a $4.0 billion + company will want to optimize its $200+ million investment in PLFX. The assets have never been accurately priced by the market because it’s never had adequate funding to execute its business plan, but the recent activity in the stock shows that a repricing of the assets is happening to account for the expected activity with Mayweather and the Abba tour as a minimum.
Although there is no direct confirmation, the breadcrumbs in the filings indicate new business activity is imminent. The price movement behind the stock seems to be driven by what appears to be management’s attempt to clean up the corporate structure. The “amicable alignment” quote from the 10-Q is very telling: they wanted Fiksenbaum to reboot operations and start churning out revenues for the parent company.
The other option is a spinout, but this too is aimed at optimizing shareholder value which means that PLFX shareholders will be the beneficiaries. FUBO shareholders shouldn’t overlook this opportunity to diversify their holdings by buying PLFX stock because if FUBO does decide to tender these shares with FUBO stock it’s a way of getting more FUBO stock at a very substantial discount.
Assuming they convert at 2.5x the $270 million valuation it works out to $675 million which means the share of PLFX would be worth $2.40 in this hypothetical exchange. Since the stock is trading at $.50 that could represent a 5X return.
The one thing that isn’t really considered in the analysis, but could result in huge upside is the announcement of a revised business model after the company gets its filings current. The stock could easily be a unicorn with a valuation well over a billion $3.50+ and an ideal asset purchase for some of the Virtual Reality/Augmented Reality and streaming companies like Nextech AR Solutions (NASDAQ: NEXCF), Disney (NYSE: DIS), Roku (NASDAQ: ROKU), and Netflix (NASDAQ: NFLX).
No matter how you look at this investment their last tender offer wasn’t successful at $1.10 and they are going to need to raise it substantially.
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Disclosure: Insider Financial and its owners do not have a position in the stocks posted and have posted this article for free without editorial input. This article was written by a guest contributor and solely reflects his opinions.