P | Panhandling? (Note Offering)

Takeaway: The pending debt raise is not likely to come with favorable terms, and could cause more harm than benefit down the road.


  1. RAISING CAPITAL: P is looking to raise $300M in debt, with an option for another $45M available to the primary bookrunner.  All we know is that the debt will be convertible (cash + stock); terms and covenants haven’t been settled yet.  Note that P has recently committed ~$356M in capital primarily toward ancillary ventures away from its core business; leaving $87M in net effective cash (vs. 3Q15 balance) prior to this offering. 
  2. TOO LATE? P probably should have explored this option a little earlier than 2 weeks prior to the Web IV decision.  That said, it’s not likely that the offering will be completed before then, which means P is not likely to receive favorable terms.  P already struggles to generate positive cash flow under the Pureplay rates, which expire at year end, and will likely be considerably lower than what it will have to pay in 2016.    
  3. WHAT DOES THIS MEAN? We’re not sure if this is just a buffer to get by while P tries to strike direct deals with the labels, or if it is planning to keep its foot on the gas on with the ad-supported model.  An Incremental $300M is not a lot relative to P’s content costs, which should eclipse +$500M in 2015.  For context, P could blow through nearly all of that $300M in 2016 on the rate increase alone in a worst case Web IV scenario (rates up +50%), while paying interest to do so.  That said, this loan could introduce an extra level of risk to the story depending on how P plans to run its model next year.  


The Web IV proceeding should be concluded by Dec 15th and announced the following day.  See below for supporting analysis on the implications of Web IV on P's business model.


Hesham Shaaban, CFA




P | Changing Its Tune (Strategic Update Call)
11/17/15 08:35 AM EST

[click here]


P: Can We Still Be Friends? (3Q15)
10/23/15 08:14 AM EDT

[click here]


P: It's All About the Benchmarks (Web IV)
10/02/15 12:22 PM EDT
[click here]


P: Fool's Gold (Web IV)
09/21/15 02:05 PM EDT
[click here]


P: Losing the Critical Debate? (Web IV)
04/08/15 08:53 AM EDT
[click here]

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more