Monster plans big cryptocurrency offering

Monster Products, known for headphones and electronics cables, is turning to cryptocurrencies as part of its latest bid to reverse a tide of red ink.

The South San Francisco company plans to raise $300 million through what’s known as an initial coin offering, a sale of digital tokens used both as a store of value and a means of payment. Monster plans to use its Monster Money tokens and blockchain technology — the technical underpinnings of cryptocurrencies like bitcoin and ethereum — to run the Monster Money Network, according to a document filed Friday with the Securities and Exchange Commission.

Monster Products said it will offer up to 300 million of those tokens at $1 each, which will then be used on the network to buy its products and services. Initial coin offerings, seen as a way to embrace blockchain technology and bypass traditional venture financing and stock offerings, have drawn regulators’ attention lately, with concerns about scams and fraud.

The move to cryptocurrency isn’t a complete shift away from the company’s main consumer electronics business, which includes products like speaker and TV cords, Chief Operating Officer and interim President Fred Khalilian told The Chronicle.

But if the SEC approves the plan, a Monster cryptocurrency opens the door for potential new revenue sources, he said. The company has a website that touts the benefits of Monster Money in manufacturing, marketing, loyalty programs and global payments.

Founded as Monster Cable Products by CEO Noel Lee in San Francisco in 1978, the company is best known for its highend speaker wires, power cables and other electronics accessories. Monster’s fortunes rose to new heights when it helped introduce the popular Beats by Dre designer headphones line in the mid-2000s.

But the company, which was not publicly traded until recently, struggled financially after the dissolution of its partnership with Beats Electronics co-founders Jimmy Iovine and Andre “Dr. Dre” Young in 2012. Since then, the company has tried to market new lines of headphones and delved into other products and services, including online poker. The company bought its first-ever Super Bowl commercial in February.

The SEC filing details the company’s mounting financial losses. Monster posted a net loss of $19.6 million in the quarter that ended March 31. That comes on top of a net loss of $26.7 million on sales of $57.5 million in 2017, and net loss of $29 million on revenue of $87.7 million in 2016.

“Monster’s current business strategy is shifting focus away from simply building its product range to pursuing alternative retail platforms and implementing new marketing campaigns,” the company said in the filing.

Monster plans to use blockchain technology “for payment processing, market analysis, accounting, audit and payroll services, inventory management and shipping operation,” the filing said. “Eventually Monster hopes to use its influence, scale and global connections along with blockchain technology to bring a number of e-commerce platforms onto Monster Money Network where transactions will be processed and completed instantly with low or no transaction costs.”

The company plans to create a total of 500 million tokens, but retain 200 million in a company wallet to be “released gradually” by the company’s board of directors as incentives for “developers, contributors and strategic partners,” the filing said.

Should the network fail to launch, the company said in the filing that it will issue 75 million shares of regular stock and exchange each share for four tokens.

This is not the only unusual financial maneuver Monster has pulled recently. In April, it was acquired by a so-called “blank check” company, Atlantic Acquisition Corp. Such firms have publicly traded shares but no operating business, and seek businesses to acquire. Reverse acquisitions, as these deals are known, allow companies to become public without undergoing the process of preparing and marketing an initial public offering to investors.

Khalilian said Lee will remain as CEO, but the company is seeking to hire a permanent president.