SeeThruEquity Initiates Coverage on Function(x), Inc. (NASDAQ CM: FNCX) with a Price Target of $3.20

NEW YORK, NY / ACCESSWIRE / April 12, 2017 / SeeThruEquity, the leading independent equity research firm focused on smallcap and microcap public companies, today announced it has initiated coverage on Function(x), Inc. (NASDAQ CM: FNCX) with a 12 month price target of $3.20.

The report is available here: FNCX Initiation Report.

Headquartered in New York, Function(x) is led by Chairman and CEO, Robert Sillerman, an industry entrepreneur known for his sale of SFX Entertainment, Inc., to Clear Channel for $4.4 billion in 2000. At Function(x), Sillerman is seeking to create a high growth business leveraging a social publishing and interactive media platform. Through its lead web properties Wetpaint and Rant, Function(x) delivers engaging content based on relationships with social influencers and celebrities. On March 8, 2017, the company announced its intention to acquire BumpClick LLC. An 8K filed by the company on April 3, 2017, outlines that, assuming the close of the BumpClick acquisition, the combined company would have 27mn unique visitors, representing 40mn sessions and 230mn page views. In addition, the company would have over 90mn social media followers reaching 340mn people on social networks each month. We see Function(x) as an intriguing speculative turnaround company in the digital media space, with an experienced management team targeting a large end market. The company has made considerable progress over the last several months, with a strategic financing of $4.8mn, the conversion of a preferred share overhang, and plans to shed non-core businesses while refocusing on growth and profitability in coming quarters.

Highlights from the report include:

Attractive end market, execution support growth opportunity

Function(x), Inc. is building a social and interactive media platform aimed at capitalizing on the shifting landscape of media consumption, and particularly the intersection of social media, entertainment, and advertising. Indeed, according to data from MediaKix, provided by the company, US digital advertising spending is expected to reach $100 billion by 2020, representing a compounded annual growth rate (CAGR) of 15% per year. Function(x) appears positioned to target this opportunity through media properties Wetpaint and Rant, where it attracted approximately 210mn page views in March, and has accumulated 10mn+ social media followers. Importantly, according to company data, Function(x) has a clearly defined user base, with 80% of its traffic stemming from mobile devices, and a gender breakdown of 85% women and 15% men.

The company’s lead web property is Wetpaint, an online destination for millennial women covering entertainment news and pop culture. Rant is a network of sites with content focused on sports, pets and lifestyle. Function(x) also holds an interest in fantasy sports gaming through DraftDay Gaming Group, Inc. (DDGG), though recent announcements suggest this unit may be shed in coming quarters. In addition to its native audience, Function(x) also leverages a social media platform that includes access to exclusive content from celebrities and influencers, patented technology, and optimized integration with advertisers and consumer brands. If consummated, the March 8 announcement that Function(x) would acquire BumpClick would likely accelerate the growth of this platform. Management estimates that, post-acquisition, the combined company would have 27mn monthly unique users.

Financing, preferred conversion are first steps in turnaround

Function(x) appears to be in a turnaround situation in which the company has recently taken important steps to restructure its balance sheet and streamline its business lines, with an aim to focus on its most promising growth businesses and likely seek complementary acquisitions. As part of this process, Function(x) recently raised $4.8mn in new equity capital in February. Additionally, Function(x) CEO and founder Robert Sillerman converted his $37mn in preferred stock holdings into common equity at a conversion price of $2.34 per share, removing an overhang and increasing his alignment with common shareholder interests. The company’s strategic moves are not yet complete, as Function(x) has stated that it is in the process of renegotiating its debt, and is also evaluating the sale of non-core assets, which could include its interest in DDGG.

Initiate coverage with a price target of $3.20

We see Function(x) as offering a combination of high risk and high reward considering both concerns over its financing status as well as an experienced management team targeting a large opportunity. The target of $3.20 assumes the company is successful in generating value from non-core businesses and reducing debt, while driving growth and meeting its aspirations for profit in the core Wetpaint and Rant properties. Considering management’s past companies, we also expect Function(x) to look to accelerate growth with acquisitions such as BumpClick when opportunities are presented.

Please review important disclosures at www.seethruequity.com.

About Function(x), Inc.

Function(x) operates Wetpaint.com and Rant. Wetpaint is the leading online destination for entertainment news for millennial women, covering the latest in television, music, and pop culture. Rant is a leading digital publisher with original content in multiple different verticals, most notably in sports, entertainment, and pets. Function(x) Inc. is also the largest shareholder of DraftDay Gaming Group, which is well-positioned to become a significant participant in the expanding fantasy sports market, offering a high-quality daily fantasy sports experience both directly to consumers and to businesses desiring turnkey solutions to new revenue streams. Function(x) Inc. also owns Choose Digital, a digital marketplace platform that allows companies to incorporate digital content into existing rewards and loyalty programs in support of marketing and sales initiatives. For more information, visit www.functionxinc.com.

About SeeThruEquity

Since its founding in 2011, SeeThruEquity has been committed to its core mission: providing impactful, high quality research on underfollowed smallcap and microcap equities. SeeThruEquity has pioneered an innovative business model for equity research that is not paid for and is unbiased. SeeThruEquity is the host of acclaimed investor conferences that are the ultimate event for publicly traded companies with market capitalizations less than $1 billion.

SeeThruEquity is approved to contribute its research reports and estimates to Thomson One Analytics (First Call), the leading estimates platform on Wall Street, as well as Capital IQ and FactSet. SeeThruEquity maintains one of the industry’s most extensive databases of opt-in institutional and high net worth investors. The firm is headquartered in Midtown Manhattan in New York City.

For more information visit www.seethruequity.com.

Contact:

SeeThruEquity
info@seethruequity.com

SOURCE: SeeThruEquity

ReleaseID: 459562