C2W Music aims to raise $140m from IPO
Music publishing start-up, Caribbean 2 World (C2W), will seek to raise up to $140 million in offering about a quarter of the company to the public, according to an investor update by its lead broker, Stocks & Securities Limited (SSL).
The company, which plans for a late December or early January listing on the Junior Stock Exchange, has yet to generate revenues but expects to turn a profit in its third year of operations.
"The first two years of operations will see a net loss for the company. This is actually a good thing, because it is in its development stages. If it turned a profit in year one, it would not be (credible)," Kimberly Thelwell, manager, investment banking and research at SSL, told prospective investors on Tuesday at the Terra Nova Hotel in St Andrew.
The company will list shares at around $1.20, which equates to investors paying between "four to six times" more than projected earnings per share within its third year of operations.
Thelwell argued that the rationale for the pricing was based on comparable listing-valuations on the Junior Stock Exchange. Stocks including Caribbean Producers Limited and General Accident were listed this year at prices that were double-digit multiples of their earning, she reasoned.
SSL plans to release the company's prospectus in "early December", said Thelwell. The company plans to earn royalties from three streams, namely, recorded and live performances, mechanical record sales, and from synchronisation of music in TV advertisements and movies.
SSL said the company would liaise with performing-rights organisations globally to collect royalties on behalf of Caribbean songwriters.
"Assuming a successful IPO, given the company's board of directors and its board of advisers and mentor and strategy, the company intends to utilise the ... proceeds to acquire talent/songwriters in the Caribbean for export to the global market," Thelwell added.
In 2010, £3.4 billion in music royalties was disbursed by the UK-based royalty organisation PRS, and some US$2 billion from ASCAP, the US-based counterpart.
Ivan Berry, a 30-year music industry veteran, will act as C2W advisory board chairman. He had earlier told potential investors that listing on the junior stock market would lift the profile of the music industry. C2W was first introduced publicly by the name Caribbean Music Publishers.
C2W's business model involves licensing songs to US megastars in exchange for lengthy revenue streams which can last under law 50 years beyond the death of the songwriter. These songs will be created by Caribbean songwriters who will split half the revenues with C2W.
Creative industries, which includes music, film, art, and dance, accounts for 4.8 per cent of gross domestic product based on a World Intellectual Property Organisation study conducted by Jamaica-based economist Dr Vanus James.