After trading under the $.50 level for the past six months, shares of Genius Brands International (NASDAQ:GNUS) have rocketed up the charts after regaining NASDAQ compliance and boosting the company’s war chest with capital. While many had left the company dead in the water as the shorts worked on their short and distort campaigns, CEO Andy Heyward focused on building his entertainment powerhouse. After selling his last company to Disney (NYSE:DIS), when will he sell Genius Brands? Which company is the most likely buyer? Disney or Netflix (NASDAQ:NFLX)?
About Genius Brands International
First up, here’s a little background info for those that aren’t familiar with Genius Brands International. Genius Brands International, Inc. is a leading global kids media company developing, producing, marketing and licensing branded children’s entertainment properties and consumer products for media and retail distribution.
The Company’s award-winning ‘content with a purpose’ portfolio includes Stan Lee’s Superhero Kindergarten, starring Arnold Schwarzenegger; Rainbow Rangers for Nick Jr.; Llama Llama, starring Jennifer Garner, for Netflix; award-winning toddler brand Baby Genius; adventure comedy STEM series Thomas Edison’s Secret Lab; entrepreneurship series Warren Buffett’s Secret Millionaires Club; and Stan Lee’s Cosmic Crusaders, created with Stan Lee’s Pow! Entertainment (POWN).
Through licensing agreements with leading partners, characters from Genius Brands’ IP also appear on a wide range of consumer products for the worldwide retail marketplace. The Company’s Genius Brands Network of channels, including Kid Genius Cartoon Channel, Baby Genius TV, and Kid Genius Cartoons Plus!, are available in over 100 million U.S. television households via a multitude of distribution platforms, including Comcast, Cox, DISH, Amazon Prime, Sling TV, Apple TV, Roku, Amazon Fire and more. For additional information, please visit www.gnusbrands.com.
After last Friday’s close, the company disclosed that it had regained compliance with the Nasdaq’s minimum bid price listing standard. On Thursday the company disclosed a registered direct offering of 20 million shares at a price of $1.50 to raise $30 million. That came less than two weeks after the company announced a registered direct offering of 7.5 million shares at $1.20 to raise $9 million.
Genius Brands International will use the proceeds to fund additional episodes. The Company will also apply the financing to fuel the growth of its newly-announced digital network for children and families, Kartoon Channel! which will launch in June 2020.
The Company has partnered with China’s Alibaba (NYSE:BABA) on the series and will use a portion of the proceeds to produce Stan Lee’s Superhero Kindergarten, as well as to pay down debt and to provide working capital.
Genius Brands International Huge Growth Potential
What many traders and investors missed on Genius Brands International was the update the company put out in April. In this update, the company forecast:
- For 2019, we expect $9.6 million in gross revenue, given that licensed products will begin to come to market in the second half of the year with many more being introduced in 2020.
- For 2020, we expect $50 million in gross revenue.
- For 2021, we expect $247 million in gross revenue.
Netted from royalties to wholesale revenues these become:
- $6.4 million for 2019
- $8.1 million for 2020
- $16.3 million for 2021.
This represents an annual percentage growth of 546% in 2019, 27% in 2020, and 101% in 2021, as both engines of Rainbow Rangers and Llama Llama hit their stride. Furthermore, it’s not just in the shows where the revenue potential is enormous, but also in all ancillary products. According to CEO Andy Heyward:
In my more than 30+ years in children’s programming, I have produced several animated brands yielding hundreds of millions of dollars and even billions of dollars in retail sales, and I have never seen a consumer product licensing program with so many product SKU’s contracted in just the first year of an animated series going on air, as with Rainbow Rangers. When I produced Strawberry Shortcake, for example, we were able to secure a similar number of SKU’s, but Rainbow Rangers has greater distribution with Nickelodeon than Strawberry Shortcake did at this production stage. Strawberry Shortcake generated more than $6 billion in retail sales over approximately five years. I consider Rainbow Rangers to have this level of potential.
When we first profiled Genius Brands International four years ago, the company was trading on the OTC Markets and had a market cap of only $15 million. Today, it’s market cap is just over $200 million and the rally is far from over. Consider the shows in development and the depth of characters in the Genius Brands International portfolio. Disney bought Marvel for $4.2 billion. CEO Andy Heyward is following the Marvel playbook. We believe it’s only a matter of time before either Disney or Netflix buys Genius Brands International.
As always, good luck to all (except the shorts)!
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Disclosure: We have no position in NASDAQ:GNUS and have not been compensated for this article.