Warner Music Group has bought social media content platform IMGN Media for an undisclosed sum sending shares up on Friday.
The stock rose 2.2% to $30.30 at the close on Friday. As part of the acquisition terms, Warner Music (WMG) will continue to let IMGN be run by its CEO Barak Shragai, as a stand-alone entity with journalistic autonomy. Although the financial terms of the deal weren’t disclosed, the price tag is estimated at just under $100 million, according to TechCrunch.
“The move adds a proven creative business to WMG’s diverse portfolio of companies, generating additional revenue opportunities and providing insight into social media trends,” the statement read.
Founded in 2015, IMGN creates and curates shareable social media content on mobile-first platforms. The startup owns and operates a portfolio of media brands in esports, gaming, entertainment, ASMR, among others.
“WMG not only offers us greater investment and support, but an entrepreneurial environment to continue growing our business, with the people running our accounts having editorial independence,” said Shragai.
Over the past few years, WMG has made several key acquisitions in data analytics companies. In 2018, WMG acquired Sodatone, giving the company enhanced capabilities to scout out and sign new breakthrough artists. WMG also acquired Opus, a marketing data dashboard that tracks an artist’s fanbase and provides insight into their behavior, in addition to Musimap, an emotional artificial intelligence-driven platform that applies neuro-linguistics along with machine learning and deep learning capabilities to voice-activated music search.
Tigress Financial analyst Ivan Feinseth initiated coverage on WMG with a Buy rating, saying that he sees “significant” upside from current levels and believes that the stock provides investors with a long-term growth opportunity. (See Warner Music Group’s stock analysis at TipRanks.)
“We are initiating research coverage on WMG with a Buy rating as it represents a pure-play in the ongoing growth of the music industry and the best way to play the secular growth in music streaming,” Feinseth wrote in a note to investors. “Increasing shift to streaming digital distribution platforms, together with WMG’s successful ability to sign new artists and continue to leverage its vast music library, will drive an increasing Return on Capital, growing Economic Profit and greater shareholder value creation.”
The analyst expects WMG will to be able to boost shareholder returns over time by using its cash flow to invest in new growth initiatives and make strategic acquisitions, as well as pay down debt and return cash to shareholders through future dividend increases.
The rest of the Street is cautiously optimistic on the stock. The Moderate Buy analyst consensus is divided between 7 Buys versus 8 Holds. The stock’s $33.86 average price target indicates 12% upside potential to current levels.
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