QuickFlix Calls In Administrators, What Will Happen To Nine’s $1M Investment?
Quickflix the online content that was dead even before Netflix arrived in Australia has finally called in administrators.
Quickflix management have pulled every stunt in the book to stay afloat including so called links with Chinese investors, US Companies linked to people who have been involved in massive Wall Street Scams as well as local capital raising.
Quickflix CEO Stephen Langsford has not commented.
As local management deserted the sinking Company, cash flow got harder and harder for the Company to generate.
ChannelNews understands that a planned restructure of the Perth based streaming Company has failed resulting in the voluntary administration move today.
The administrator is Ferrier Hodgson. Quickflix’s New Zealand business continues to operate through its local subsidiary and is not in voluntary administration.
Back in 2014, Nine Entertainment invested over $1M into rival Quickflix, it now looks that Nine Entertainment could either take control of the Company or lose $1M.
At the time a series of warrants and covenants came with their share acquisition.
When Nine Entertainment took over the redemption rights put in by HBO which ensured they were protected in the case of a “liquidation event” there was a warrant that would result in the owners being entitled to a $10.5m payment in the event of “a disposal of substantially all of the Company’s assets, a merger or takeover, a person other than the shareholder acquiring a voting power of more than 51% in the Company, or any change in the majority of the members of the Board of Directors unless the replacement Directors were nominated by the majority of the Company’s Board.”
The move was designed in the event that Netflix moved to take a controlling share in Quickflix.
If other player such as Foxtel, Seven Media or Telstra the cost of acquiring Quickflix, which back in 2014 had a market capitalisation of some $17.8m, the price would go up dramatically. Today Quickflix’s market capitalisation is currently just $2.22 million.
Mumbrella wrote at the time ‘While Langsford may be pleased that Nine’s investment helps avoid another board coup similar to the one he faced a month ago he must also recognise that Nine, which is spending millions of dollars investing in technology, content deals and preparing to build a subscription base, would also be eyeing his assets and it is here that the liquidation first rights must be attractive”.
The $1M investment meant that at minimum Nine has made sure anyone eyeing Quickflix as an easy entry point to the Australian streaming marketing will think twice before jumping in.
In a note to investors, founder and chief executive Stephen Langsford highlighted a shareholding by rival streaming service Stan as a key stumbling block for the ailing business.
Stan is jointly owned by Nine Entertainment and Fairfax Media, It acquired the $10 million in redeemable preference shares from US studio HBO in 2011.
“Despite Quickflix being first to the streaming market and holding a leadership position in 2014, ongoing growth has required capital for continued investment in content and marketing,” Mr Langsford said in a statement to the ASX.
“Neither Nine Entertainment nor Stan have ever participated in any capital raisings to assist Quickflix’s growth and its ability to raise capital from any source has been constrained by the redeemable preference shares.”
The Australian said that Quickflix had recently been trying to restructure those shares, which rank ahead of ordinary shareholders, but the company said Stan had stonewalled any attempt to change the structure.
Quickflix said Stan would only accept a restructure if it was paid $4m in cash or alternatively, a payment of $1.25m plus the transfer of all of its streaming customers and an undertaking not to compete with the streaming company.
“Neither alternative presents a viable option for Quickflix,” said Mr Langsford.
“In the first instance, Quickflix does not have the funds to make payments to Stan, nor does the company believe it can raise funds from investors for that purpose.
“Neither alternative leaves Quickflix in a position to fund its unsecured creditors nor with capital necessary to take the business forward.”