Vancouver’s Shahrzad Rafati regains control of BroadbandTV through $172m IPO

BBTV and BroadbandTV CEO and founder Shahrzad Rafati | submitted

What happened: BBTV goes public, raising $172m, in one of the largest tech IPOs on the TSX

Why it matters: The offering allows the Vancouver firm to take back a controlling stake in BroadbandTV

One of Vancouver’s largest tech companies is firmly back in control of its founder and CEO following an initial public offering that has allowed BBTV Holdings Inc. (TSX:BBTV) to buy out the controlling stake in BroadbandTV Corp.

BBTV’s IPO of subordinate voting shares went live Wednesday (October 28), raising $172 million.

The injection of capital allowed the holding company to acquire RTL Group’s 51% stake in BroadbandTV for just under $158.8 million.

“It’s a very proud moment for all of us at BBTV. Few companies get to experience what we’re experiencing now,” Shahrzad Rafati, CEO of both BBTV and BroadbandTV, told BIV.

She now owns 34% of BBTV’s equity shares and has 83% of its voting power, giving her effective control over the direction of BroadbandTV, the company she founded in 2005.

BroadbandTV is best known for developing a platform that helps create, distribute and monetize video content for online consumption.

It has just over 350 employees, with 266 in full-time roles.

Rafati expects the company to ramp up everything from strategic acquisitions to expanded revenue growth following the IPO, with additional hiring expected in B.C.

She added that the shift towards remote working will also allow it to recruit more global talent that may have previously been harder to lock down.

Meanwhile, Rafati estimated revenue will climb 25% in the third quarter of 2020 compared with the same period a year ago.

The CEO characterizes her company as being a “COVID winner” owing to the shift in content viewership from traditional media to digital platforms amid the surge in consumption during the pandemic.

“With this continuous emergence of new platforms and the rapid growth of video supply and demand, content owners of any size [need] help to navigate this complex digital landscape,” Rafati said.

“Digital advertising has really benefitted from this shift from mainstream media to digital. This is why we felt this was the right time for an IPO.”

The company said Wednesday’s offering is among the 10 largest tech IPOs ever on the TSX and the first with a sole woman founder and CEO in the technology sector.

“It’s a special milestone for us and a monumental day,” Rafati said.

“We’re hoping that we’re breaking new ground and paving the way for countless women and girls who envision a future with more potential to be leaders.”

Luxembourg-based RTL Group, a subsidiary of Germany’s Bertelsmann SE & Co. KGaA, delivered a $36 million investment in 2013 in exchange for a 51% stake in BroadbandTV.

The European media company went on to invest a further $30.9 million in the company.

BBTV retained a 49% stake in BroadbandTV, which meant Rafati could previously be overruled by RTL in boardroom decisions.

Most the new board is Canadian, and includes Well Health Technologies Corp. (TSX:WELL) CEO Hamed Shahbazi, Hootsuite Inc. executive chairman Ryan Holmes, Clearbanc’s (Clear Finance Technology Corp.) Michele Romanow and Marcel Reichart of Bertelsmann.

BBTV says it will use the remaining money raised from the IPO to fund business operations, offering expenses, strategic acquisitions and growth initiatives.

“The sale is consistent with RTL Group’s three-priority strategy — core, growth, alliances and partnerships — which includes continuously reviewing the Group’s portfolio and growing its European digital assets in the areas of streaming, advertising technology and digital video,” RTL Group said in a statement.

Jill Tipping, CEO of the B.C. Tech Association, said she’s happy to see a West Coast company seeking an IPO rather than priming itself for a strategic buyer.

“It’s been a bit quiet on the IPO front,” she said.

“I’m expecting it will pick up quite a lot in 2021.”

Last week BBTV priced its shares at $16 ahead of the IPO.

Early trading shows the shares fetching $15, down 6.25% from the opening price.

Its prospectus shows BBTV’s revenue has gone from $33 million annually in 2014 to $372 million as of 2019.

The company calculates annual revenue for 2020 is set at $388 million based on money coming in during the 12 months between the second quarter of 2019 and the second quarter of 2020.

BBTV recorded about 439 billion views over its platform between June 2019 and June 2020, and the company asserts it has the second-most unique monthly viewers of all digital platforms: 596 million vs. Google’s 1.118 billion.