KSIX Media (KSIX) announced this morning the signing of a definitive agreement to acquire True Wireless (web site), an eligible telecommunications carrier providing discounted and subsidized cell phone service to those who qualify.
We first alerted this deal when KSIX was trading under .20/share in October, but since then True Wireless has increased the estimate on EBITDA from $2.9 million to $3.1 million and now there is a definitive agreement in place.
The final share count following the acquisition is expected to be about 80 million shares. With telecoms trading at 20-30x EBITDA, that puts a target market cap for KSIX much, much higher than it presently trades at. With a post-acquisition estimate of 80 million shares the KSIX market cap at .42/share = 33.6 million. With EBITDA of $3.1 million x (low end of range) 20 multiple, KSIX should ultimately rise to a $62 million market cap… on the conservative end of the scale.
Moreover, the 2016 EBITDA of $3.1 million could ramp quite rapidly next year with the marketing efforts of the KSIX media team. The CEO of True Wireless, Brian Cox, explained that KSIX Media “helped increase revenues by 49%” in the previous two quarters. So it’s not a stretch to expect the combined companies and management to continue to accelerate that growth. There’s a strong business and marketing synergy here, and that’s what you want to see in an acquisition of this sort.
NBEV Backer and Turnaround Director now Quarterbacking KSIX/True Wireless Deal
Our best performing pick of 2016 has been New Age Beverage Corp (NBEV). This was a pick made in April when the stock was just .40/share. As I write this, NBEV shares are trading over $5/share, for a gain exceeding 1,000%.
Why does this matter?
It matters because the person who earlier this year took a struggling American Brewing Company, tweaked the model and got the right team in place to run the company was an investor by the name of Kevin Fickle at Nuwa Ventures. Investors should know that Kevin is also the man behind the scenes with the KSIX acquisition of True Wireless.
If there’s one thing I’ve learned as an investor, it’s that having great management alone isn’t enough in acquisitions. The unseen backers behind the deals- the investors who help get the right people in place (as Kevin Fickle did at American Brewing over 1,000% ago), the people that offer financial backing and make the right introductions to new sources of capital and human resources are also key. When you find one that has a proven track record of bringing in the right people and capital to drive shareholder value, you follow the money.
KSIX in the .40s represents a very good risk/reward play going into 2017. Very few know about it yet, and that’s the best time to buy. Even with this morning’s news shares have traded just 40,000 shares so far…but don’t expect that to last- not many knew about NBEV at .40/share either. Trading will likely be choppy and I’m expecting some wild swings along the way, but also expect shares to settle considerably higher in 2017 as this acquisition rolls out.
I’ll be following the progress of KSIX in the coming weeks and months, and am long the stock.
I have not been compensated for this article. I am long shares of KSIX.