Wells Fargo Affirms Eros Int'l (EROS) at 'Market Perform' Following $30M Equity Raise
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Wells Fargo affirms Eros International (NYSE: EROS) at Market Perform with a valuation range of $14 - $16 after the company announced that two existing top ten institutional shareholders of the Company have increased their holdings in Eros. The Company raised approximately $30 million through a private placement, the proceeds of which will be primarily used to fund further expansion of Eros Now, the Company’s OTT platform.
The firm commented,
We really don't know the rationale behind the private placement, vs. a public debt raise or equity issuance. The press release is light on details, but we can only conclude two likely scenarios for the private placement: 1) the institutional holders wanted a larger stake in EROS, or specifically ErosNow, to participate more in the upside while also collecting a nice fee; or 2) the company needed the capital and didn't want to approach the debt markets - but we would point out that management seemed confident on prior earnings calls that the company was well-positioned to self-fund ErosNow investments. It could also be a combination of these factors, as EROS is only slightly FCF positive at the moment (partially due to withholding content sales for a quarter) and a private capital raise may have made sense for both the company and shareholders who would like a bigger piece of EROS - especially since there is a limited float of the stock.
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