New Listing - PodcastOne (NASDAQ: PODC)
Supply / Demand Disruption Potential of Massive Exposure Coming for Under-followed New Listing with Tiny Public Float
Tiny float of 1.3m shares w/ reported short interest over 335,000 shares
CURRENT short interest may be over 50% of float given borrow fees / trading
Short borrow fee surged from 28% to 399%+ since NSDQ published short data
No options or warrants for newly listed stock so no way for shorts to hedge
Shorts dropped stock from listing at $8 down below $2 over several weeks
PODC is so new its ticker not in Fintel, Reddit, ShortSqueeze.com or others yet
Zero debt - all debt converted to restricted stock at $3 per share in Sept
Share buyback up to $4.75m announced by parent co. after fall below $3
1.3m float could be bought back in full well above current trading price of $2.10
All podcasters issued stock so nearly 200 shows with 6 million listeners will hear about PODC stock in the weeks and months ahead.
PodcastOne (NASDAQ: PODC) completed a direct listing on the NASDAQ several weeks ago and is now the first publicly traded pure play podcasting stock. Despite a strong operating performance over the last 12 - 24 months and what appears to be significant momentum going forward (see recent raise of projections here), the stock has been taken lower by short sellers to prices that are nonsensical given the company’s operating performance, creative talent (podcasters) assets, experienced management and prospects. In discussing podcasting industry dynamics (and the pullback by some of the larger players) in a recent interview, PODC Executive Chairman Rob Ellin stated “There is kind of this perfect storm in podcasting right now. You had this wild cycle-- Spotify, Apple, iHeart spending billions and billions and billions of dollars and big multiples, to acquire both individual podcasts, whether it was Joe Rogan or was buying networks or buying technology. Now is that opportunity where there's a window where a sophisticated management team like ours who has the history of doing this and the history of doing it in radio and now in podcasting could acquire and roll up multiple podcast networks." Thus, we fully expect to see PODC grow by acquisition as well as by growing revenue for acquired and developed shows through the company’s extensive network of advertisers (see graphic at bottom). There are many reasons why we think investors would do well to buy the stock but the two most obvious are that it is significantly undervalued given their assets / prospects mentioned above and there is a very small supply of shares available (1.3 million per management presentation at LD Micro conference) for public investors to participate in what we think could be an epic growth story going forward.
We believe PODC will be “discovered” by investors in the days ahead as this new company and ticker are entered into all of the financial databases and included in the forums where investors go to find information on stocks for investment. Given the uniquely small supply of shares for a $50m revenue per year company with such a large consumer following, we believe there are several groups who might contribute to a surge in demand as investors become aware of the PodcastOne story - a company valued by third party analytics firm ValueScope at $11-$13 per share trading at an enormous discount due to some unusual market dynamics (i.e. listing opened for trading in the worst month of the year plus short seller attack from day one). We believe the tiny float of 1.3 million shares could become a big factor in driving the price higher when investors become aware of the PODC story and we believe this uptick in buying demand will come from these four kinds of investors:
1) Retail investors who listen to podcasts – PODC’s new stockholders’ (its podcasters) shows can now begin with intros mentioning that PodcastOne is now NASDAQ listed so listeners can essentially own a share of their favorite podcast shows. We also expect to see some mentions by podcasters, many of whom have now have tens of thousands and some with hundreds of thousands worth of PODC stock. As shareholders they now have every reason to give it a little “plug” from time to time and as ALL of the podcasters now own at least some stock (see official announcement here and where Adam Carolla posts it to his reddit feed here). With the broad reach of those 200+ exclusive podcasts, this means over 6.5 million unique listeners per month could be exposed to the PODC story. If some small percentage of those investors decided to buy a few shares of their favorite podcast network, those numbers alone could transform the PODC shareholder base by buying up the entire retail float. See how the numbers work - if we say conservatively that only 1% (65,000) of those listeners are investors and then only 10% of that group actually follows through and buys shares, that would be 6500 investors. And if they only bought 200 shares each, that would equal to the entire public float of PODC – 1.3m shares. With the stock currently trading in the $2 range, it is not too far-fetched to see at least some small percentage of PodcastOne listeners investing in the PodcastOne stock and for those who do to put in at least a few hundred dollars.
2) Retail investors who use stock screeners – there are many investors who use stock screeners to discover new stocks to invest in. As of October 17, 2023 and any days prior, many of the financial data providers (Fintel, ShortSqueeze.com, etc.) do not yet have PodcastOne or the ticker PODC in their database to be discovered by investors. Beginning some time over the next few weeks we should see all of these services’ databases updated as PODC and other new NASDAQ listings will be added. We believe that PODC will be discovered for several criteria that investors often screen for these days including but not limited to small public float, large short interest as a percentage of the public float, high cost to borrow for short sellers, low price to EBITDA and of course if any search is done for a pure play podcasting stock, they will find that Podcast One is the only one.
3) Retail investors generally and opportunistic traders – while we see PODC as a long term play on an experienced management team rolling up an industry at a stage where it seems particularly suitable, there is clearly an opportunity for traders who are looking to find tiny float stocks that are “in play”, as we’d expect to see a significant repricing of PODC shares when the stock is discovered by these different groups of investors. As mentioned above, the PodcastOne ticker (PODC) is not even in the Fintel or ShortSqueeze.com databases yet, not on InvestorsHub, no board on Reddit ((r/PODC is a parents of deaf children group) and a StockTwits board was just started and has barely 100 followers (even the smallest companies usually have a few thousand). So you can see that Podcast One does not yet exist in many of the places retail investors and traders go to find their next stock and we are confident that will be changing over the next few weeks.
4) Short sellers – we expect to see significant buying interest from short sellers as the stock begins to rebound from what appeared to be a short selling induced sell-off that pushed the shares from the initial listing at $8 down below $2. With over 27% of the public float already reported as sold short on Tuesday Oct. 10 and short borrow fees surging to levels rarely seen absent some supply/demand disconnect (i.e. where most of the public float has been sold short), the short sellers may find it increasingly difficult to buy to cover their positions as they essentially get squeezed in the increased demand for that very small supply of shares. Readers should note that the reported short interest is based on a measure taken by NASDAQ on September 29. The price action, volume traded and intel we have picked up from investors who were buying PODC during the weeks following Sept. 29 indicates that a significant portion if not a majority of the volume traded in the week following that report involved counterparties who seemed to be pushing for lower prices. This should come as no surprise to anyone who was watching the stock trade during that time, as the stock was walked lower and lower each day as accumulators of the stock saw telltale signs of short sellers at work. Between these trading indicators and the banks’ surge in short seller borrow rates over the last few sessions (from low teens first week of October to as high as 379.95% yesterday at Interactive Brokers; the only place we could actually find available shares), we believe that the CURRENT short position may be substantially higher and possibly more than 50% of the public float.
In summary, we believe that PODC is a stock that investors will want to own as PodcastOne grows its operations through value-added organic growth and acquisitions. We believe PODC to have among the shrewdest management teams in the industry and will not be surprised to see the company exceed the recently raised projections for FY 2024 as the company ramps up its M&A machine. In the near term, we would not be surprised to see a dramatic repricing of the shares as investors become aware of the story and the supply of 1.3 million publicly traded shares are insufficient to meet the surge in demand without the stock price moving significantly higher.