Townsquare Announces Purchase of Management Options That Were Expiring Shortly, Thereby Avoiding Shareholder Dilution

Rhea-AI Summary

Townsquare Media, Inc. (TSQ) announced the purchase and retirement of 3.0 million options held by management and board members at a net price of $3.62 per option. This move eliminates potential shareholder dilution and aligns management's interests with investors. The company's strong cash generation, with $68 million in cash flow from operations in 2023, allows for strategic investments and stock repurchases below perceived value.

Insights

Financial Analyst

The retirement of 3.0 million options by Townsquare Media represents a strategic move to prevent shareholder dilution and to signal the management's confidence in the company's future. By purchasing these options below the current market price, the company is effectively reducing potential future shares, which could have a positive impact on earnings per share (EPS) metrics. The use of cash on hand to fund the transaction indicates a healthy liquidity position, which is further corroborated by the reported $68 million cash flow from operations in 2023. This liquidity allows the company to engage in share repurchases, which are often viewed positively by the market as they can indicate that management believes the stock is undervalued. The repurchase transactions, along with the high-yielding dividend, could be seen as a commitment to returning value to shareholders.

However, investors should consider the opportunity cost of using cash for option retirement and share repurchases. While these activities can drive short-term stock appreciation, they might also limit the company's ability to invest in growth opportunities. The balance between rewarding shareholders and funding internal growth is a critical factor in evaluating the long-term prospects of Townsquare Media.

Market Research Analyst

Analyzing the market's response to Townsquare's recent financial activities, including the repurchase of shares and retirement of options, suggests a deliberate effort to optimize capital structure and enhance shareholder value. The management's ownership of approximately 11% of shares outstanding reflects a significant alignment of interests with external shareholders, potentially reducing agency costs and encouraging decisions that are in the best interest of shareholders. Moreover, the company's positive cash flow growth underscores its operational efficiency and could signal robust financial health to investors.

It is also important to note that analysts have set an average stock price target of $16.83 for Townsquare, which exceeds the current trading price. Such a target, if accurate, would imply that the stock is undervalued and that the company's repurchase activities are financially prudent. However, investors should be cautious and conduct their own research, as price targets are based on projections that may or may not materialize.

PURCHASE, N.Y., April 08, 2024 (GLOBE NEWSWIRE) -- Townsquare Media, Inc. (NYSE: TSQ) (the “Company” or “Townsquare”) announced that that it bought and retired 3.0 million options held by certain members of the management team and board of directors for a net purchase price of $3.62 per option. The purchase price reflects the spread between the closing price on April 3, 2024 of $12.36 and the option strike price of $8.74. The options, all of which were set to expire in July 2024, were granted to members of management and the board at the Company’s initial public offering in July 2014 (the “IPO options”). This transaction follows last week’s repurchase of 1.5 million shares from MSG at $9.76 per share, the June 2023 repurchase of 1.5 million shares from MSG at $9.70 per share, and the March 2021 repurchase of 12.6 million shares and warrants from Oaktree Capital Management, L.P. at $6.40 per share. Like last week’s 1.5 million share repurchase from MSG, the purchase price of $10.8 million will be funded entirely with cash on hand.

“We are very pleased to share that we were able to buy the IPO options at a net purchase price of $3.62 per option, eliminating the overhang and the shareholder dilution that would have occurred had these in-the-money options been exercised in the open market before they expired this July. The members of management and the board that were involved in this transaction have been with Townsquare for over a decade, demonstrating that our long-term incentive plan was, and continues to be, effective in retaining top talent. In total, our management team owns approximately 11% of shares outstanding today and are well aligned with the Company’s investors to build shareholder value,” commented Bill Wilson, Townsquare’s Chief Executive Officer.

“Once again, we were able to utilize cash on hand to settle the transaction, due to the strong cash generation characteristics of our business model, which produced $68 million of cash flow from operations in 2023 (+35% year-over-year), and which also funded our internal digital growth engine, accretive share and debt repurchases, and our high-yielding dividend to date. Our strong cash generation continues to provide us with financial flexibility moving forward, giving us the opportunity to advantageously buy our stock when it is trading below value, which we (and the research analysts who give Townsquare an average stock price target of $16.83) believe it is today. We look forward to discussing our first quarter results as well as our second quarter 2024 outlook on our earnings call on May 9^th,” concluded Mr. Wilson.

About Townsquare Media, Inc.
Townsquare is a community-focused digital media and digital marketing solutions company with market leading local radio stations, principally focused outside the top 50 markets in the U.S. Our assets include a subscription digital marketing services business, Townsquare Interactive, providing website design, creation and hosting, search engine optimization, social media and online reputation management as well as other digital monthly services for approximately 24,000 SMBs; a robust digital advertising division, Townsquare Ignite, a powerful combination of a) an owned and operated portfolio of more than 400 local news and entertainment websites and mobile apps along with a network of leading national music and entertainment brands, collecting valuable first party data and b) a proprietary digital programmatic advertising technology stack with an in-house demand and data management platform; and a portfolio of 350 local terrestrial radio stations in 74 U.S. markets strategically situated outside the Top 50 markets in the United States. Our portfolio includes local media brands such as WYRK.com, WJON.com and NJ101.5.com, and premier national music brands such as XXLmag.com, TasteofCountry.com, UltimateClassicRock.com, and Loudwire.com. For more information, please visit www.townsquaremedia.com, www.townsquareinteractive.com and www.townsquareignite.com.

Forward Looking Statements

Except for the historical information contained in this Press Release, the matters addressed are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements often discuss the Company’s current expectations. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “could,” “would,” “will,” “plan,” the negatives thereof and other words and terms. The forward-looking statements contained in this Press Release include, but are not limited to, statements related to the Company’s long-term business plan. By nature, forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or implied by the forward-looking statements. Forward-looking statements are based on current expectations and assumptions and currently available data and are neither predictions nor guarantees of future events or performance. You should not place undue reliance on forward-looking statements, which speak only as of the date hereof or as of the date specified herein. See “Risk Factors” and “Forward-Looking Statements” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (the “SEC”) on March 15, 2024, and subsequent filings with the SEC, for a discussion of factors that could cause the Company’s actual results to differ from those expressed or implied by forward-looking statements. The Company assumes no responsibility to update any forward-looking statement as a result of new information, future events or otherwise.

Investor Relations
Claire Yenicay
(203) 900-5555
investors@townsquaremedia.com

FAQ

What did Townsquare Media, Inc. (TSQ) announce regarding options held by management and board members?

Townsquare Media, Inc. (TSQ) announced the purchase and retirement of 3.0 million options held by certain members of the management team and board of directors.

What was the net purchase price per option for the 3.0 million options?

The net purchase price per option for the 3.0 million options was $3.62.

How did Townsquare Media, Inc. (TSQ) fund the purchase of the options?

Townsquare Media, Inc. (TSQ) funded the purchase of the options entirely with cash on hand.

What percentage of shares outstanding does the management team own?

The management team owns approximately 11% of shares outstanding.

What was the cash flow from operations in 2023 for Townsquare Media, Inc. (TSQ)?

Townsquare Media, Inc. (TSQ) generated $68 million in cash flow from operations in 2023.