By David Keene
Digital Signage Content Management Software provider, BroadSign, filed for Chapter 11 bankruptcy protection over the weekend. The company, based (technically/legally) in Boise, Idaho, listed debt of $10 million to $50 million and assets of $1 million to $10 million in Chapter 11 documents filed late Sunday, March 4th, in U.S. Bankruptcy Court in Wilmington, Delaware. But the company’s debt burden is not great, and there is little or no debt to vendors. BroadSign is apparently already seeking to emerge from the process as a financially stronger company, starting this week at the Digital Signage Expo in Las Vegas.
BroadSign Chief Executive Officer Brian Dusho said in court documents, “The most effective way to maximize the value of their estates for the benefit of creditors is to complete a prompt sale of substantially all their assets.” Bloomberg News reported on Monday morning that the company is seeking court approval to borrow as much as $328,295 to help fund operations until it completes the sale.
According to court documents, BroadSign and two affiliated companies owe their twenty largest unsecured creditors about $2.3 million, with Olton Management the largest at $1.3 million claim.
That was the official/legal news– but in an industry marked on the software side by a large number of smaller sized, non-public companies, you need to read between the legal lines.
It is unclear at this point exactly how this Chapter 11 filing will allow BroadSign– which had a large number of investors– to be reorganized with a more manageable shareholder structure. Everyone in this industry will have a different spin on what this news portends.
But Broadsign will be exhibiting at the Digital Signage Expo in Las Vegas this week and the picture should clear up. I have learned that BroadSign– whose top executives continue on the job this week after the court filing– will have its full contingent of employees on hand at the BroadSign booth at DSE this week. Sales forces, support staff, still in place. Brian Dusho, who joined the company as CEO in 2008 and in fact turned it around to profitability in 2011, continues as CEO.
At this point– and let me stress that nothing is confirmed– it seems that the kind of bankruptcy protection that large U.S. companies routinely use to strengthen their profitability, with manageable damage to the brand, could be in play here. It’s public knowledge that BroadSign had a large number of investors (more than one hundred), and being a privately held company it was perhaps inevitable that most of those investors–without the daily pricing evidence of a listed stock– could not agree over the years on specifics of pricing their shares, etc. And with one investor, Burr Smith, holding a large relative share of the company and indeed funding the spurt in growth in the past 3-4 years, there would eventually be a need to restructure. Key to the restructuring will be the fact that the debt holders do not include vendors in this industry. We’re talking about debt holders on the finance side, not a typical exposure where vendors and/or customers get left with unsecured debt wiped out in a Ch.11. And it’s more likely than not that BroadSign’s largest investors will now buy the company, and try to increase market share from a more stable capital base.
If Broadsign’s large customers can be reassured of their viability going forward with a more efficient capital formation structure, it could signal a maturation of the digital signage and DOOH industries– albeit one that still faces challenges especially on the software side where low barrier to entry creates a crowded vendor marketplace even as the industry looks at double-digit growth year after year.
By David Keene