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Cheat Sheet: Forbes plans to go public through SPAC to invest in paid consumer goods

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Cheat Sheet: Forbes plans to go public through SPAC to invest in paid consumer goods

Forbes announced this morning that it is going public through a special purpose vehicle (SPAC), making it the latest media company to grow its business by helping a mailbox company.

The SPAC is sponsored by Magnum Opus, a Hong Kong-based blank check company that went public on the New York Stock Exchange in March. The deal values ​​Forbes, a 104-year-old company, at more than $ 600 million. Unlike BuzzFeed and Group Nine, which announced SPACs last year, according to Forbes CEO Mike Federle, the plan is initially not aimed at acquiring other media companies, but rather at producing more consumer goods for sale to people.

“The time is now really ripe for a bold step to enter the public market,” said Federle.

The key data:

  • The transaction is expected to generate around 600 million combined companies, at $ 10 per share from investors (meaning existing owners can benefit from any increase in their remaining stake in the share price).
  • The transaction is expected to close at the end of the fourth quarter of 2021 or the beginning of the first quarter of 2022. Forbes shareholders are expected to own approximately 22% of the merged company upon closing.
  • The investment will be used to expand the company’s technology, capital, advisory and luxury goods offerings, as well as to promote joint venture and licensing agreements, Federle said.
  • Forbes had sales of $ 180 million in 2020, down 15% from the previous year.
  • Forbes has an audience of more than 150 million worldwide, and the publisher currently has 23,000 paying subscribers. According to Comscore, the website had 51 million unique visitors in July 2021.
  • Unlike some other digital-native publishers who announced plans to go public last year, Forbes is a long-established brand that still owns a print magazine.
  • As of 2014, Hong Kong-based investor group Integrated Whale Media Investments owns 95% of Forbes; the rest of the company is owned by the Forbes family.
  • Forbes ‘existing management team will continue to oversee operations under Federle, who will serve on Forbes’ new board of directors.

The business collapse

Forbes’ business is divided into three sources of revenue: media (e.g. advertising), consumers (e.g. subscriptions), and brand extensions (e.g. conferences and trademark licensing agreements).

Forbes is projected to generate $ 138 million in media revenue (up 5% year over year), $ 47 million in brand extensions (up 19% year over year) and $ 16 million in consumer revenue (up 75% year over year) this year Previous year). , so the investor presentation. The company expects consumer sales growth to slow in 2021 and 2022, while media and brand enhancement sales growth is expected to pick up or remain stable.

According to the investor presentation, Forbes currently has 23,000 subscribers and aims to eventually attract more than 1 million subscribers, although the company has not given a specific timeframe for that goal. Another long-term goal is to reach more than 15 million registered users.

What the public money will be used for

Forbes aims to use the content it publishes to find ways to introduce consumer-facing paid products to grow its consumer sales from currently 12% to 38% of its business. Ad revenue will drop from 65% of the Forbes business to 45% (the remainder will come from brand extensions).

At least that’s the idea. Federle said this will take “several years” but “significant results” will be seen in 2023 as Forbes won’t be able to fully invest public money until 2022 in advertising revenue, “said Federle.

As an example of what the SPAC funds could be used for, Federle referred to Q.ai, a company founded and owned by Forbes that falls under the consumer revenue category. The app uses AI technology to provide investment recommendations. Forbes also licenses an online business school called the Forbes School of Business and Technology on the University of Arizona Global Campus. “We have provided evidence of where we can invest in companies that are doing very well … and we can open up new markets, in education, investment or even luxury and travel,” said Federle.

Profiles are another example. Forbes America’s Top Wealth Advisors list ranks the best financial advisors in the United States. According to Federle, the annual conference of this franchise generates millions of dollars in consumer revenue. Forbes then created Profiles, a LinkedIn-style platform for those on the list where consultants can pay for a premium list on Forbes and use that for their own marketing. Forbes technology team has developed a number of tools to support Profiles as well.

What the public money is not used for

M&A is not necessarily a focus of the SPAC, according to Federle. “We specifically kept it out of our investor plan when we spoke to investors when we set up the PIPE because it’s easy to say, ‘Hey, we’re going to be making hundreds of millions in new acquisitions for hundreds of millions in revenue.’ – but that doesn’t really happen until it happens, ”he said.

Forbes needs to build stronger infrastructure (both as an organization and as a technology platform) for acquisitions before it can consider which companies to buy and integrate, said Shahid Khan, a telecommunications consultant at Arthur D. Little, said Shahid Khan. Practice for information technology, media and electronics (TIME). “Before you buy other businesses, you must have your own house in order,” he said.

Why go the SPAC route?

Federle said a SPAC is “the most streamlined process for going public”. The benefits of going public are that it can provide the money to “execute our aggressive growth plan” without incurring debt. No debt “gives us even greater leverage in the future when looking for acquisitions,” said Federle. SPACs are “a great way to raise capital for free”.

A SPAC is known to cause less investor pressure compared to a traditional IPO. The shell company goes public with a promise to investors that it will eventually acquire and merge with a private company to go public and serve as a way for a company to go public and deal with the sale of stocks to start on the stock exchanges to raise money.

For every eligible company that can currently acquire a SPAC, Khan says there are six to seven SPACs chasing them in the telecommunications and media space. “It’s a huge win for SPACs in getting Forbes to join them and go public about them,” he said.

Forbes has led to this moment for the past decade, Federle said. Over the past 10 years, Forbes has built a contributor network, added products like its content marketing platform BrandVoice, and expanded popular franchises like 30 Under 30.

Forbes has built its technology stack, data and analytics skills to now subdivide its audience into cohorts and create products and experiences specifically for those groups of people based on their interests, Federle said. “We intend to generate a lot of consumer revenue. It’s not a hard paywall strategy, it’s a premium product strategy, ”he said.

How the Forbes IPO fits into the media company SPAC trend

SPACs have been on everyone’s lips at media companies lately. Amid the pandemic, investors are looking for bang for their buck, and SPACs are proving to be a popular alternative to a more traditional IPO. BuzzFeed and Group Nine announced their own SPACs last year – both with the aim of taking over other media companies. The Bustle Digital Group, Vox Media and Vice Media are also reportedly considering going public.

Digital media deals are generally closing as this summer draws to a close. German publisher Axel Springer announced today that it is buying Politico, with reports that the deal valued the political publisher at over $ 1 billion. Nexstar Media acquired The Hill last week.

A “diverse” board?

Forbes’ board of directors will have nine members, including Federle. As part of Forbes’ Diversity, Justice and Inclusion initiatives, Federle wants “Diversity on the Board”. When asked if he had a specific goal in mind, Federle said he didn’t believe in quotas and that the board could be a mix of women and people of color.

“I already have some names of people that I would like to have on the board and that Opus would also like to have on the board,” said Federle.

Cheat Sheet: Forbes plans to go public via SPAC to invest in paid consumer products

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