Business Context and Reporting Period
Company: comScore, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: January 7, 2021
Event: Entry into Material Definitive Agreements for a capital raise and debt refinancing.
On January 7, 2021, comScore, Inc. entered into separate Series B Convertible Preferred Stock Purchase Agreements with Charter Communications Holding Company, LLC ("Charter"), Qurate Retail, Inc. ("Qurate"), and Pine Investor, LLC ("Pine"). Concurrently, the Company entered into an agreement with funds affiliated with Starboard Value LP ("Note Holders") to settle outstanding indebtedness.
Key Financial Metrics and Transaction Terms
- Capital Raise: The Company agreed to issue and sell 82,527,609 shares of Series B Convertible Preferred Stock (27,509,203 shares to each Purchaser) for an aggregate purchase price of $204,000,000.
- Debt Settlement: Proceeds will be used to pay off outstanding indebtedness, specifically senior secured convertible notes due January 16, 2022. The Company agreed to pay Note Holders $204,000,000 plus accrued interest to satisfy this debt.
- Preferred Stock Terms:
- Dividend: Cumulative annual dividend rate of 7.5%, payable in arrears.
- Conversion: Initially convertible at a 1:1 ratio into Common Stock.
- Liquidation Preference: Senior to Common Stock; junior to all secured and unsecured indebtedness.
- Voting Rights: One vote per share, voting as a single class with Common Stock, subject to a 16.66% voting threshold cap per Purchaser.
- Executive Compensation:
- CEO Bill Livek: $1,000,000 Refinance Bonus (RSUs) contingent on Closing.
- CFO Gregory Fink: $350,000 RSU award.
- CCO Christopher Wilson: $350,000 RSU award.
Material Changes and Governance
The transaction represents a significant change in the Company's capital structure and governance:
- Board Composition: Upon Closing, the Board will expand to 10 directors. Each Purchaser (Charter, Qurate, Pine) will designate two directors. The CEO and three current directors will remain.
- Stockholder Approval: The transaction is subject to approval by a majority of shares of Common Stock present at a special meeting and the adoption of a Certificate of Amendment.
- Debt Elimination: The transaction effectively retires the Company's senior secured convertible notes held by Starboard Value LP.
- Standstill Agreements: Purchasers and Note Holders have agreed to standstill restrictions regarding the acquisition of additional equity and solicitation of proxies for 12 months post-Closing.
Guidance, Risks, and Contingencies
- Closing Conditions: The Closing is contingent upon stockholder approval, expiration of the HSR Act waiting period, absence of legal restraints, and the accuracy of representations and warranties.
- Termination Fees: If the transaction fails due to a failure to close by July 1, 2021, failure to obtain stockholder approval, or a material breach by the Company (and an alternative transaction is consummated within 12 months), the Company must pay a termination fee of $1,800,000 per Purchaser (aggregate $5,400,000).
- Expense Reimbursement: If terminated due to failure to obtain stockholder approval, the Company must reimburse each Purchaser up to $500,000 for out-of-pocket expenses.
- Risks: Risks include failure to obtain required government authorizations, stockholder approval, or customer/vendor consents; delays in closing; and the impact of the COVID-19 pandemic.
- Special Dividend: The Stockholders Agreement allows for a one-time "Special Dividend" on the Series B Preferred Stock after January 1, 2022, subject to conditions.
Investor Verification Checklist
- Verify the outcome of the special stockholder meeting required to approve the Series B Preferred Stock issuance and Certificate of Amendment.
- Confirm the final closing date and whether the $204 million debt payoff to Starboard Value LP was executed as planned.
- Monitor the composition of the Board of Directors post-Closing to ensure the appointment of Purchaser designees.
- Review the definitive Proxy Statement for detailed risk factors and the full text of the Stockholders Agreement and Registration Rights Agreement.
- Assess the impact of the 7.5% cumulative dividend obligation on future cash flows and liquidity.