Provides Growth Capital as Market for Platform Expands
BEAVERTON, Oregon, Sept. 29, 2020 /PRNewswire/
-- Digimarc Corporation (NASDAQ: DMRC), creator of
the Digimarc Platform for digital identification and detection,
today announced a $53.5 million
investment from TCM|Strategic Partners led by long time shareholder
Riley McCormack.
"We are very pleased by the vote of confidence evidenced in this
investment from TCM|Strategic Partners and look forward to
welcoming its principal investor, Riley
McCormack, to our Board of Directors. Riley is a long
time shareholder, astute investor, and an extremely diligent
student of the company and its strategy who will help guide the
company through continuing expansion of the market for our
platform, such as the massive sustainability initiative announced
recently," said Bruce Davis,
Chairman and CEO. "This investment gives us adequate working
capital for the foreseeable future, allowing management to focus
all its energy on growth of the business and continuing roll out of
Digimarc Barcode as successor to traditional barcodes."
Mr. McCormack explained, "TCM|Strategic's decision to make this
investment was the result of two conclusions:
- The Legacy Business and the Growth Business are each worth more
today than the current enterprise value of the entire company.
- The Growth Business has not only the opportunity but also the
high likelihood of being worth significantly more in the
future."
TCM purchased approximately 2.5 million shares of common stock,
representing 19.9% of the company's outstanding common stock, with
the balance of the investment to be made through the purchase of
convertible preferred shares, subject to the satisfaction of
customary closing conditions. The convertible preferred
shares will convert automatically following shareholder approval
required under Nasdaq Listing Rules 5635(b) and 5635(d).
A summary of the principal terms of the investment follow.
Please refer to the Form 8-K and documents filed with the SEC for
additional information:
- Investment Amount: $53.5
million
- Securities Purchased:
-
- 2,542,079 shares of common stock (equal to 19.9% of common
stock outstanding) for an aggregate purchase price of $36,529,675
- 16,970 shares of Series B Convertible Preferred Stock for an
aggregate purchase price of $16,970,000, subject to the satisfaction of
customary closing conditions
- Purchase Price Per Share for Common Stock: $14.37/share, a 15% discount to the average
closing price of Digimarc common stock for the trading days from
August 24 – September 28, 2020
- Terms of Series B Convertible Preferred:
-
- Dividends: 7.5% per year, cumulative; payable
in cash or, at the option of Digimarc, accumulated and added to the
Liquidation Preference (described below). Also entitled to
participate in dividends declared or paid on the common stock on an
as-converted basis
- Conversion: No conversion unless and until
shareholder approval is obtained; the preferred will convert
automatically into common stock following receipt of shareholder
approval
- Conversion Price: $14.37/share
- Liquidation Preference: Purchase price plus
accumulated and accrued but unpaid dividends
- Payment upon change of control, liquidation or
dissolution: Greater of (i) Liquidation Preference, or
(ii) amount holder is entitled to receive on an as-converted
basis
- Repurchases or Exchanges: participate in offers to
repurchase or exchange shares of common stock on an as-converted
basis
- Voting Rights: Vote with common on an as-converted
basis (calculated on the basis of the voting conversion price),
subject to 19.9% cap on combined voting power of common stock and
preferred
- Protective Provisions: A majority of the
outstanding preferred will be required to approve specified company
actions that could adversely affect the preferred stock ((i)
creation or issuance of parity or senior securities, (ii)
amendments or modifications to Articles of Incorporation that would
adversely affect the rights, preferences or voting powers of the
preferred stock, (iii) certain business combinations and
transactions in which preferred stock is not cashed out, unless the
rights, preferences or voting powers of Preferred Stock are not
adversely affected, and (iv) certain transactions with
affiliates)
- Restrictions on Transfer: Subject to specified
exceptions, for one year following the closing, TCM|Strategic may
not transfer shares of common stock issued in connection with the
investment. The same restriction applies to the preferred
shares for six months following the closing.
- Standstill: Subject to specified exceptions, for one year
following the close of the transaction, TCM|Strategic is
subject to restrictions on, among other things, acquiring
securities, assets or indebtedness of Digimarc, or effecting a
tender or exchange offer, merger or other business combination
involving Digimarc or its assets. TCM|Strategic and its
affiliates may, during this time, make additional purchases that,
aggregated with this investment, would not exceed 27.5% of the
outstanding common stock.
- Board Representation: Riley
McCormack will be appointed to the board of directors of
Digimarc Corporation.
A special meeting of the shareholders to approve the conversion
of the preferred shares into common will be scheduled shortly.
About Digimarc
Digimarc Corporation (NASDAQ: DMRC) is
a pioneer in the automatic identification of media, including
packaging, other commercial print, digital images, audio and video.
The Digimarc Platform provides innovative and comprehensive
automatic identification software and services to simplify search
and transform information discovery through unparalleled
reliability, efficiency and security. The Digimarc Platform enables
applications that benefit retailers and consumer brands, national
and state government agencies, media and entertainment industries,
and others. Digimarc is based in Beaverton, Oregon, with a growing supplier
network around the world. Visit digimarc.com and follow us
@digimarc to learn more about The Barcode of Everything®.
About TCM|Strategic
TCM|Strategic is an investment
fund managed by Riley
McCormack. Prior to founding TCM|Strategic, Mr.
McCormack was the founder, CEO and PM of Tracer Capital Management,
a $1.5 billion NY-based global
Technology, Media and Telecommunication Hedge Fund. Prior to
Tracer, Mr. McCormack was a partner at Coatue Capital and a High
Yield research analyst at Morgan Stanley. Mr. McCormack
graduated Summa Cum Laude from the Wharton School, University of Pennsylvania, where he was a Benjamin
Franklin Scholar and a Joseph Wharton Scholar.
Forward-looking Statements and Additional Information
This press release includes "forward-looking statements" within the
meaning of Section 21E of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and Section 27A of the
Securities Act of 1933. These statements include, without
limitation, statements regarding the investment by TCM|Strategic
and participation of its principal investor, the current and future
value of the Company and its businesses, the continued expansion of
the market for our platform, various initiatives, the adequacy of
our working capital and the increase in the value of our growth
business. Such forward-looking statements include all other
statements that are not historical facts, as statements that are
preceded by, followed by or that include words or phrases such as
"may," "might," "plan," "should," "could," "expect," "anticipate,"
"intend," "believe," "project," "forecast," "estimate," "continue,"
and variations of such terms or similar expressions. These
forward-looking statements are based on our expectations and
beliefs concerning future events impacting us, and are subject to
uncertainties and factors which are difficult to predict and, in
many instances, are beyond our control. As a result, our actual
results could differ materially from those expressed in or implied
by any such forward-looking statements, including as a result of
the size and growth of our markets; protection, development and
enforcement of our intellectual property portfolio; adoption or
endorsement of our technology by leading companies in the retail
and consumer products industries or standard-setting bodies or
institutions; our future profitability; competition from larger
companies or alternative technologies; and acceptance in our
markets of our revenue models and pricing structures.
Investors are cautioned not to place undue reliance on such
statements, which reflect management's opinions only as of the date
of this release. More detailed information about risk factors that
may affect actual results are outlined in the company's Form 10-K
for the year ended December 31, 2019,
and in subsequent quarterly reports on Form 10-Q and current
reports on Form 8-K filed with the SEC and available at
www.sec.gov. Forward-looking statements speak only as of the
dates on which they are made and except as required by law,
Digimarc undertakes no obligation to publicly update or revise any
forward-looking statements to reflect events or circumstances that
may arise after the date of this release.
In addition to our forward-looking statements, we may reference
or disclose from time to time statements or information provided to
or about us by our investors, partners and actual or prospective
customers. Such statements and information reflect the beliefs,
expectations, views and opinions of the party making such
statements, not of the Company. The Company cannot verify or
vouch for such information, and investors are cautioned not to
place undue reliance on any such statements.
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