7digital to raise £3m to invest in music platform

Digital music and radio services platform 7digital plans to raise about £3m to invest in its core platform through an open offer and a £750,000 bookbuild.

There will be a placing of new shares at 6.5p per share, a discount of the middle market price of 10.3p on Thursday, to raise about £2.26m with certain directors subscribing for about £200,00 in the placing.

An open offer to existing shareholders will be available at up to £750,000 with the placing subject to shareholder approval at the next general meeting on 28 March.

The AIM-listed company plans to use the proceeds to strengthen its balance sheet, to invest in its core platform and deliver master quality authenticated (MQA) services.

Meanwhile, 7digital is in talks to buy European rival 24-7 Entertainment AG, which is based in Berlin and Copenhagen, for about £1.66m through the issue of 23m new shares of 7.25p each.

The company believes that the acquisition, which is expected to complete by the end of May, will contribute significant revenue and be earnings before interest, tax, depreciation and amortisation (EBITDA) neutral in 2017 but add about £1m to EBITDA in 2018.

Chief executive Simon Cole said: "The digital music ecosystem is developing as we had expected and I am particularly pleased that we can now count all three major record labels as our customers. The support of the industry for hi-res music and in particular for the MQA technology, which we have championed, is just one of the ways in which the digital music marketplace is maturing.

“We believe that there is significant opportunity for growth in both geography and new services as that maturing process continues.”

Shares in 7digital were down 5.52% to 6.85p at 0907 GMT.