Dotcom's Baboom eyes $8.5m of new capital

A screen shot of the Baboom online music service website.

Baboom, the online music service part-owned by flamboyant internet entrepreneur Kim Dotcom, will look to raise up to A$8.5 million this year as it funds a full product launch in the coming six months.

The company is seeking A$4.5 million from professional investors, selling shares at 40 Australian cents apiece and valuing the business at A$39.5 million, according to an offer document published on Baboom's website. That would be followed by an initial public offer in which Baboom would raise between A$3 million and A$4 million, pending due diligence and the firm's capital needs, with a view to list by mid to late November on the ASX, Ben Yeo of Novus Capital, the offer's financial adviser, lead manager and sponsoring broker told BusinessDesk.

The initial A$4.5 million outlay would be spent on buying a 20 percent stake in the ONEall social network login platform, developing its mobile platform, integrating backend systems and buying and licensing music.

"By the time the offer closes I envisage the company to be in a strong position to develop its backend systems, mobile platform and content acquisition prior to the platforms hard launch either late December 2014 or January 2015," Yeo said in an email.

Baboom is looking to woo musicians and licence holders by offering them up to 90 percent of revenue generated by the platform through downloads, subscriptions, merchandising and ticketing, essentially supplanting the traditional network of agencies.

The pre-IPO capital raising closes on Aug. 18, after being extended for a week to allow chief executive Grant Edmundson to meet several potential investors in Australia, and has attracted interest from investors in Australia, New Zealand, Europe and Asia, Yeo said.

Baboom is 45 percent owned by interests associated with Dotcom via Coatsville Trustee Services, 45 percent by Michael Sorensen's Vig Ltd, which also holds an 11 percent stake in Mega, and 10 percent by executive director Xavier Buck, who also leads product development.

The offer is touted as a speculative investment involving significant risks, citing Dotcom's Megaupload as a potential hurdle to attract music suppliers given its alleged copyright infringement and digital music service business models as challenges.

Still, the company sees a tie-up with Dotcom's Mega file-storage business as providing a potential 8.4 million plus users and using a so-called Megakey to let users to build up credits by watch online ads, which can then be used to download music. Customers would also get up to 50 gigabytes of storage for music they've purchased.
Baboom would only have an exclusive licence on such a deal for between one and three years, according to the offer document.

The upcoming Baboom float coincides with Mega's plans to list on the NZX via shell company TRS Investments, in a deal valuing the file-sharing company at $210 million. Mega is in the process of raising US$7 million ahead of the reverse listing.

Auckland-based Dotcom staged a launch for Mega in early 2013 to replace Megaupload, his previous venture which was shut down in a US-led operation that alleged the file-sharing firm and its owners had committed mass copyright infringement and money laundering of more than US$500 million. He and co-accused Finn Batato, Mathias Ortmann and Bram van der Kolk are fighting extradition to the US where they faces the charges.