XLMedia’s controlling shareholders sell $50m. stake
The AIM secondary UK stock exchange is no longer a preferred target for IPOs by Israeli companies. It is still, however, being used as a platform for secondary offerings by the companies already listed on it. The most recent example is XLMedia, which markets online gambling websites. The XLMedia share price recently soared to an all-time high, a fact that did not escape the attention of the company’s shareholders, who conducted a major offer for sale at the end of last week.
The largest shareholder, WebPals Enterprise Limited Partnership (WELP) sold 40 million shares at £1 per share, yielding proceeds of £40 million ($50m.) and reducing its stake from almost 43% to 23%, a sale of 20% of XLMedia’s share capital. This measure will unquestionably boost the trading turnover in the share. WELP’s original plan was to sell 25 million shares, but excess demand enabled it to increase the amount of shares sold.
The share price jumped to £1.125 two weeks ago, reflected a 104% return on the price in the company’s IPO in the spring of 2014.
XLMedia’s market cap is $256m., a multiple of 11 on its results last year: $103m. in revenue (15% growth) and an adjusted EBITDA of $34.5m. (33% EBITDA margins and 21% growth on the year).
XLMedia’s control structure is quite complicated and untypical of a technology company of its type. CEO Ory Weihs built an independent business in marketing online gambling websites and merged it with Yaron Nahari and Assaf Levy’s company, WebPals. Investors in WebPals included Shay BenYitzhak and Avner Yassur. Ben-Yitzhak is a cofounder of 888 Holding, operator of the world’s largest online casino, with a market cap of $1.07 billion. Yassur, an IDF combat pilot, began as VP marketing of Noam Lanir’s Empire Online Ltd., and was one of the key people in its success.
In the first half of 2012, Yassur became linked with businessman Zvika Barinboim, who became a shareholder in WebPals by buying some of the founders’ shares in the company, rather than through an equity investment. WELP was created in the framework of the merger. Alex Rabinovitch and Dejan Nikolic are also partners in WELP.
Nikolic is a former VP technology at Empire Online, while Rabinovitch has been known in recent years mainly as a biomed investor and Rosetta Genomics Ltd. Rabinovitch was also a managing partner in the DS Apex brokerage, controlled by Victor Shimrich and Ido Neuberger. The second largest shareholder in XLMedia is Israeli fund VP Partners, which invested $15m., and whose stake fell to 9.6% following the offering. This fund is the Israeli branch of US private equity fund Columbia Nova Technology Partners. One of the partners in this fund is Israeli Yaron Eitan, known as the founder of Geotec.
This structure has created a situation in which Weihs has both a direct and an indirect holding in the company. According to XLMedia’s announcement, his holding in the company fell to 3.4% following the offering; 1.2% directly and 2.2% indirectly through WELP. It is very likely that WELP will divide the cash it received from the sales of shares among its shareholders as a dividend, including Weihs, according to their stakes in the partnership. Since Weihs’s holding in XLMedia was decreased by four million shares, his share of the offering amounted to £4m. ($5m.).