Inside ‘The Walking Dead,’ ‘Invincible’ Owner Skybound Entertainment’s $75 Million Public Equity Campaign

Skybound Entertainment is the company behind some of the most popular original IP of the past 20 years, including The Walking Dead, Invincible (both from the mind of cofounder Robert Kirkman) and the upcoming movie Renfield. Like many companies that got started in comics publishing, Skybound is looking to assert more control over the production and distribution of its material across the media landscape by increasing its internal capabilities. But unlike others who have sought institutional investment or overseas financing, the privately-held Skybound LLC is going directly to its fans with an unusual investment offering.

Today the company is announcing a new Regulation A+ campaign on the Republic platform to raise up to $75 million in new capital direct from the public, including $11 million raised in a quiet-period round that just ended. [prospective investors, be sure to examine the company’s Form 1-A]

On Friday, I spoke with Skybound CEO Dave Alpert and co-Chairman Jon Goldman about the company’s strategy, the terms of the offering, and what Skybound is trying to accomplish with the new infusion of cash. Our conversation has been edited for length and clarity.

Rob Salkowitz, FORBES Contributor: Can you briefly summarize what Skybound is up to with this announcement?

Dave Alpert, CEO, Skybound. At Skybound we talk about “the Wheel of Awesome,” where we help creators commercialize their ideas in any medium they want to, from digital to TV to comics to games. The purpose of this Reg. A raise is to bring the fans into our ecosystem, have them be inside the company, make our success their success and be that connective tissue.

RS: It looks like you are offering 150,000 “units” at $500 each, is that correct?

Jon Goldman, co-Chairman, Skybound: The headline raise is $50 million and you’re allowed to extend to $75 million, so we’ll see where it goes.

RS: Does that include the $11 million already raised during the quiet period?

JG: Yes.

RS: I note that in the Prospectus, it says the price of the units bears no relationship to the company’s asset value, worth or earnings. On what basis are you pricing the units then?

JG: I think that’s probably legalese. We arrived at a fair market valuation in consultation with the platform Republic as well as some research groups that looked at the stock for us. We had priced an institutional round at $330 million post money, and that was before we had a second [post-The Walking Dead] hit, Invincible, which is a legitimate global hit. I think that given the growth trajectory, and the fact that we are probably the second largest independent library of IP not owned by a major conglomerate, there’s value there. And when you consider the multiples in the videogame industry, which is a large part of our business, we feel that we priced it sensibly.

RS: So, ballpark, what percentage of equity does this offering represent?

DA: We’re based at $500 million pre-money, so it’ll be a little less than 10% post-money [based on the baseline $50M target, not the extended goal of $75M].

RS: How will the new capital be used?

DA: If I may give you a little narrative context first… For the first 9 years of the company were entirely bootstrap. We put all the money we were making back into the company. We started out touching the consumer directly in comics, but in the in television we still had to go AMC and studios and networks to get our shows out to market. In gaming, it was purely a licensing business.

As we continued to recycle our profits and our cash flow, we ended up building up more capacity to option and develop and pay for scripts in the film ans TV space. We expanded our comic book business. On the videogame side, we had some in-house talent that would help supervise the production.

As the company continued to grow, we realized we were making a tremendous amount of money for third parties, and not necessarily as much for ourselves or our creators. We saw that there was both a market opportunity and an obligation to take a little bit more of that in house. Then, in 2012, we had a situation where we needed to come up with several million dollars on short notice to salvage a videogame project when our partner went bankrupt. That was tough without access to outside capital.

In the past, it’s taken us a long time to get outside partners to see the value of our IP. Now we’ll be able to accelerate that, by bringing more of that capacity in house and not relying on third parties to make things happen for us.

RS: You mentioned that part of your goal is to build this partnership between fans, creators and the company. Are any shares being set aside for creators? Are they participating?

DA: We’re offering creators the ability to buy in; in lieu of cash, right? [The offering] is about a cash raise, so people want to participate in that way, we’re absolutely willing to do that, and we’re encouraging people to do that.

RS: Are the units being offered through the Reg A sale common stock with voting rights and rights to distributions, or are they a special class?

JG: They have the same rights as common stock, same as Dave and Robert [Kirkman] and I have. As minority shareholders, they can’t force the direction of the company, although they often say smart things, and as we’ve seen on the campaign page, they are not shy about expressing their ideas, and that’s fine.

RS: Are these units liquid? Is there a secondary market for them where people can sell them?

[At this point, the Skybound PR rep joined in to clarify some points for the principals]

JG: It’s not liquid the way a public company is, although there are now investment banks that deal in secondary markets for private companies, especially in large blocks. The limit on this offering is that one individual can buy up to $2 million, so I imagine if we have any big players like that, they’ll have opportunities for secondary sales in the future. It will probably be harder to move single units.

RS: Some might see this public campaign and think you’re trying to raise money by appealing to people’s fandom rather than their investment sense, because people have such an emotional stake in the properties. What do you say to them?

JG: If you looked at it that way, we’re incredible undervalued and Tesla is incredibly overvalued (laughs). If you did a traditional comp analysis of global IP holding companies – for example, the ones that sold to Disney – I think it’s easy to draw the conclusion that there are many multiples of the pricing that our investors can earn on exit. You know, we can’t guarantee it; no business can. But the types of things we do are valued far more highly than $500 million at some potential exit point.

DA: We had, and still have, plenty of opportunity to take more institutional money, and at some point may end up doing so. The goal here was twofold: one to raise additional capital for our strategic initiatives across media, but also the opportunity to partner with the fan really is something that we think is transformational in the sense that a lot of traditional media companies, and even some of the disruptive ones, like NetflixNFLX
, are still organized around that one form of distribution, and we can switch the focus. We think we’re the first media company organized around, not just an individual channel distribution, but on connecting you to that in a 360-degree way.

RS: Given this grand strategy that you’re proposing in terms of media integration and direct access to customers, are you concerned about the headwinds we’re seeing in the streaming, entertainment and tech industries right now?

JG: No. Everybody is adhering to that traditional strategy, but the idea of putting together our own stuff is in not having to sell it to a streamer immediately. To be able to sell that show that we talked about in Africa, individually by territories, I think, is going to end up being a very smart strategy. And, by the way, both of us have been through up and down markets, and it turns out that people spend more on entertainment in a downturn, because some people have more time on their hands, and they spend more money.

RS: One thing we’ve seen in the past year with investments and acquisitions in the comics space is that the investors are getting much less patient, and companies find themselves having to make hard choices with layoffs and strategy. By going directly to the public for this kind of capital, to people who are not in a position to play so rough with you guys, do you think you’ll have a little more space to pursue your strategy?

DA: It’s about not being dependent on those outside forces. The whole point of this Reg A for us is, if you buy a share of stock in Skybound, we’re on the same team. You’re following us. We’re following you. That is a real thing: nobody, not Facebook, Netflix, AmazonAMZN
, or AppleAAPL
, can take that away. And that is why this is such a powerful thing for us.