ARTISTdirect Shareholders Applaud Changes
ARTISTdirect, Inc. [[ARTD.OB]] shares jumped more than 600% in today’s trading after the company announced changes to its capital structure. The company paid off its senior debt with a $3.5 million cash payment, 9 million shares of restricted common stock, and the issuance of new five-year subordinate notes in the aggregate amount of $1 million. Meanwhile, the company’s subordinated debt was converted into 36.7 million shares of common stock.
These transactions are mixed news for shareholders. ARTISTdirect was saved from a crushing debt that could have lead to insolvency, but this came at a substantial cost in terms of equity dilution. The number of shares outstanding would more than triple, but the company’s future now looks significantly better without debt. The move comes after a year of hard work and positions the company to turn their attention to growing the company organically and acquiring strategically related businesses.
ARTISTdirect operates one of the largest destination sites on the internet for music and motion picture news, information and streaming music. The firm also operates an ad network that is currently ranked 5 in ComScore’s ranking of music web sites. Finally, the firm provides internet IP protection to major motion picture studios, record labels, television networks, gaming companies and software publishers and internet marketing services to advertising agencies and other clients.
ARTISTdirect shares traded at more than $2 per share in just 2007 before falling from grace after the economic slowdown began. Many investors are now hopeful that this change in capital structure can fuel the company back to its previous highs – but it’s still a long road ahead.
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