Yet Another Value Podcast - Adam Wilk from Greystone Capital on Liberated Syndication $LSYN

Episode Date: April 14, 2021

Adam Wilk, founder and portfolio manager at Greystone Capital, discusses his investment thesis in Liberated Syndication (LSYN). Key topics include why the company would make an attractive acquisition target, how Libsyn can grow in a competitive environment, and potential upside from a lawsuit that could cancel ~30% of LSYN's shares overnight.Adam's Twitter account: https://twitter.com/AKWilkAdam's LSYN thesis on seeking alpha: https://seekingalpha.com/article/4416747-liberated-syndication-update-and-favorable-developments Chapters0:00 Intro1:15 Libsyn Overview11:10 Libsyn Valuation12:55 Libsyn vs. Competitors19:35 Is Libsyn losing market share?23:10 Comping Libsyn to Dropbox29:10 The hunt for a new CEO37:30 Could Spotify dominate podcast hosting like YouTube for video?44:35 Upside from Libsyn's lawsuit to cancel shares

All right. Hello and welcome to the yet another value podcast. I'm your host, Andrew Walker. And with me today, I'm excited to have Adam Wilk. Adam is the founder and portfolio manager over at Greystone Capital. Adam, how's it going? Good, thanks. Thank you very much for the invite. I'm a big fan of the blog and the podcast. So it's my pleasure. Thanks a lot. Hey, I appreciate the kind words and I appreciate you coming on. So let me just turn it right around, start the podcast the way I do every podcast. That's by pitching you my guest. Look, I think you're one. of the sharpest small and microcap focused investors out there you you certainly timed launching your small microcap focused fund right because i i think you you launched in q1 of 2020 which is a nice time to launch but you know i i'm a shameless thief and i steal ideas from your uh your letters every quarter i go looking through them for new ideas so uh really happy to have you on the pod and uh really excited to talk about the company we're going to talk today about today lipsin so uh tickers ls y n this is a microcap. So disclosure, you have a position in this just to get it out of the way.

Everyone should do their own work, not rely on anything. But I'll flip it over to you. What is Lipson and why are you so interested in them? Yeah, thank you very much for the kind introduction. So I've been involved with Lipson probably since about mid-2020. And I'd say a lot has changed with the business since I first started covering them and since I first started researching them, especially in the last like month or two. I guess at a high level, Lipson is a podcast hosting platform. And they operate two segments. One is Lipson 4, which is their core podcast hosting segment. And then they have pair networks, which is a go daddy like website hosting and domain name registration company. It's one of the lesser known ones that they acquired back in 2017.

We'll get to that at some point down the road. But Lipson was first. founded in 2004, actually right at the very beginning of sort of the initial stages of podcast creation. Like, for example, I think Bill Simmons started his podcast in like 06 or 07. So it was kind of right at the beginning of that time to sort of take advantage of that new sort of medium. It was founded by a few guys in Pittsburgh, originally as wizard software and then was acquired by a company, a bigger entertainment company called FAB Universal, which we'll also get into later, I'm sure. That's an important part of the story. And in 25th, late 2015, 2016, FAB spun out Lipson and it now trades over the counter, as you mentioned.

And that's where it trades today. And sort of at a high level, podcast hosting is basically a way for creators to record, upload, distribute their podcasts. And Lipson is really the first, one of the first, if not the first podcast hosting platforms that kind of allowed these like storage, bandwidth, RSS feed kind of tools for the podcast creator. And as a result of that, they really have this interesting sort of first mover advantage that has resulted in a decent competitive positioning for them. And they've experienced really significant growth from their founding and especially from the last four or five years.

I think their podcast hosting platform has grown in something like an 18% Kager on average since 2016. And despite all of the issues, surrounding the business, which we'll also get into in a minute. They have very low churn, if any. I don't believe they've lost any customers, and that kind of speaks again to their competitive positioning and kind of the stickiness of the platform.

And, yeah, sort of as I mentioned, you know, podcast hosting in general is just kind of a way. It's an easy way for creators to upload audio files. I don't believe you're a Lipson user, but, you know, I don't have to tell you, you know, you know how that works, obviously, and want you create your show and use the player, you can then tie it to all kinds of things that you're doing,

like your website, your blog, you can embed the player, you can share the links, you can make it easy for people to find. So pretty simple business to understand. You know, it serves as a vehicle to kind of transport the audio to other places. And as I mentioned, Libson is one of the more established businesses, and right now they have a little over 70,000, or excuse me, around 80,000 podcasts, and they have the most top four, they have most, they have more of the top 400 rated shows in any other platform. And they also have the most paid subscribers among any

other platform. And while this has changed a little bit recently, I would call Lipsin probably the tool for like the serious podcast user, you know, that's definitely, that definitely doesn't exist in a vacuum. But what I mean is compared to like, say, an anchor, which is maybe like, um, oh, you know, one to three-click podcast creation thing where you can open your phone, download the app, record something and distribute it somewhere, which, and they have seen explosive growth. Lipsin is a little bit more for people who, again, have that website. They want to tie it to, you know, they want to put a little more effort into the shows.

They want to pay for it. You know, Lipson is a paid platform. And in line with that, they have pretty competitive pricing for their Lipson for kind of their core podcast hosting. they have pricing that starts with like $5 a month and goes up to I think 75 and then there's a side of it which starts at $100 a month and goes up to I believe $250 a month. And right now I believe the split based on the latest financials we have, I believe the split is about 75% of podcast hosting revenue comes from Lipson 4 and the other chunk comes from

Lipson Pro. And then there's a small contribution from advertising, which we can get into a little bit as well, which is where a lot of suppliers and distributors are really making a big push these days to kind of figure out ways to monetize their platforms and shows for creators and help people kind of make money in that way. But yeah, that kind of brings us to today where, again, Lipson has somewhere in the neighborhood of, you know, six billion downloads and they're one of the largest paid podcast hosting platforms. And kind of interesting because there's really no like pure play hosting. platform, at least publicly traded as well. Obviously, Spotify is kind of the 800-pound gorilla that's making a huge push into all kinds of audio podcasting, especially as of late. But Lipson is really like, Lipson kind of sits between, or actually I can take a step back.

So the industry is kind of made up of what I would say, suppliers, distributors, and then consumers. Suppliers obviously would be like somebody like yourself who's creating a podcast, yet another value, NPR, New York Times, something along those lines, who are the creators of the content. And then you have the distributors, which everybody knows, the Apple Podcasts, the Spotify, the Google Pod. And Lipson kind of sits somewhere in between there where they're not exactly like a supplier because they just serve as the hosting platform and they're not exactly a distributor

because there's no like Lipson app where you can go to listen to podcast. So they kind of sit in between there. And as a result, it kind of makes for an interesting. interesting business to try to compare and value. But yeah, so, and as a side note, I guess Spotify, obviously as a distributor, they're making a huge push into being like all things podcasting. They're pretty much trying to aggregate both the supply and distribution side by, and you can tell with all the shows that they've acquired recently, Bill Simmons the Ringer, Joe Rogan,

among others, and then all the other acquisitions that they've made. I think Gimlet, Anchor was one of them. And so basically they want to be a place where you can go to get the distribution for all the content you like, but also where they're going to be creating their own content and acquiring content. And, you know, obviously they've spent a ton of money in that area, have made a huge push. It's not exactly apples to apples. People always ask me about, you know, Spotify and how that's going to affect Lipson.

To be honest, while the investment thesis doesn't really rest on this case completely, Lipson would actually be a decent acquisition target for them down the road once some of the issues are cleaned up surrounding the business. But yeah, so today the investment thesis kind of rests on the idea that the business is pretty much at an inflection point. And when I came across the company, you had this situation where you had a good business with a strong competitive position that was generating a decent amount of cash and that was growing pretty significantly over the last few years, but the former management team made it so the company was really uninvestable. They really spent no resources or time on the actual product or growing the customer base

or trying to capture the market share, which is really a crime because Lipson, again, started to really take off right at the inflection of when podcasting did, which I would say 2016. And the penetration rates for people who listen to podcasts and the content creators has really climbed up over the last few years as well. And so the investment thesis really is that you had a good business with a strong competitive position and it's at an inflection point because you finally have a group of people in charge after a long activist and proxy battle who are interested in actually moving the business forward and growing that core podcast hosting platform, which is really going to be their focus.

And you can really tell that over the last few months about with some of the moves that they made in the acquisitions. And the idea was that you really weren't paying much for the business today. Any growth that you got in the podcast hosting segment would really meaningfully add to the bottom line. And I would say, again, for the first time in the company's history, you have a management team and a group that's really going to invest in and try to grow the actual business. And then there's also what has sprung up kind of recently and sort of throughout this whole proxy and activist battle is that there's now a number of additional catalyst and sort of a couple of free options that should also materialize over the next, I would say, year plus

12, 18, 24 months that should also help drive the share price and valuation higher. And then sort of as an outside thing, if they explore an uplisting, which they're doing, there are a number of hurdles that they have to get over to get that done. But if they happen to achieve that over, over the next year or so, I think like the end of 2021 was a fair goal for the management team, from what I understand. That would obviously improve, you know, investor interest and they'd be able to communicate the story more. And so kind of putting all those things together, again, if they just continue to execute sort of business as usual, I think investors should do okay. The company still generates cash. They've got a clean balance sheet. Things are a little different

now with the businesses that they purchased and the share count and that kind of thing. I'm kind of annoyed their late filing their 10K, so we don't really have updated financials to work off of. But yeah, I think ultimately, you know, if they continue to execute and some of these catalysts materialize, I think it should work out pretty well. Perfect. That was quite the overview. So I guess the first thing, we need to keep this in mind with everything we do is like, I think the core to your thesis, and you tell me if I'm wrong, the core to your thesis, hey, this is a company that's trading 125, $130 million enterprise value, something around there. And they do $25 million in trailing revenue, right? And podcast hosting, hosting in

general, obviously there's Lipson and Impair, but whatever, you know, 25 million in trillion revenue. So you're paying five times revenue. This is an EBITO profitable company. Hosting is sticky. How many companies with sticky hosting revenue trade for five times revenue and are growing double digits? Probably not many. So am I right that's, if I was just to boil down the thesis, that would be a very simplified way to say it? Yeah, I think you nailed it. And, part of my process too is to I really enjoy sifting through businesses that are good businesses, but have some hair on them. And if there's a management team in place that's incentivized to kind of remove that hair and something, they're issues that are easily solvable,

then it makes for an attractive situation because then you can kind of clean up the business and people can start to see that it's a good business that deserves a multiple. It's kind of funny. I was listening to your podcast with Jacob Rubin, I think, on Aros. And he was saying kind of a similar thing where it was, you know, when you have some issues that are solvable, when they get solved, you can really have investors step in and say, well, this business is worth way more. So I enjoy sifting through situations like that. I would probably say this represents one of those. But you also nailed it. That's pretty much, yeah, that's pretty much it. Perfect. No, that's great. So I do want to push back on some pieces of this. So like,

My first pushback, so I was talking to Bobby Craft, who runs Planet MicroCap before this. And he hosts at a different website. And, you know, he's planning at MicroCap. So Lipson is right up his, and he's thought about switching to Lipson. I host at Buzz Sprout. Buzz Sprout, if you want to come give me some, you know, advertising fees for pitching you on the podcast. Please go ahead. But, you know, both of us pitch and both of us are, both of us have podcasts.

We're aware of Lipson. We're on different things. And both of us kind of were talking. We're saying, hey, you know, there's no real incentive for us to switch. over to Lipson, right? Now, that's probably good for Lipson because for anyone they host, there's no really incentive for them to leave, but that was our first push-pick, right? It was, hey, what's the difference between a Buzz Sprout, a pod bean, you know, whatever podcast hosting and Lipson, it feels like there's just eight of these guys and they're not differentiated. So

that would be my first and simplest pushback, right? Like there's eight people. They're all pretty much the same. Going forward, the way you grow is probably, hey, I'm willing to pay the most to get to the top of Google advertising for when somebody searches for podcast hosts. I pay the most on Google advertising. I get them. But that's not exactly the path to kind of economic earnings growth, if that makes sense. You might be able to grow, but you're paying for that growth. So how would you respond to that first set of pushback? It's a really good point. And to that point, you know, this space is really competitive. So despite Lipson being a good business, I would characterize the industry as a whole as just low barrier to entry one, where again, if you decide to create a podcast,

and you know nothing, you're going to probably Google it and people who want to spend the most on Google to get noticed, maybe Buzz Sprout or Pot Bean or whatever it is, or ones who are good at SEO, which Lipson historically has not been, you're probably going to go with one of those. Maybe you'll do more research in terms of pricing and what you're looking for and how serious you are, but it's not, it's a competitive space with low barriers. The thing that Lipson has going for them is that it's sticky, right? So once you're on a podcast, which they've been able to obviously grow their user base, once you're there, and you can probably speak better to this, I don't have a podcast, and you're a serious podcast. So once you get above sort of that 50 episode mark, which is kind of the number that a lot of industry people peg is like a serious user or something, certainly, you know, not, doesn't apply to everybody.

But once you get above that number, you've got all kinds of things that are maybe tied into the show, such as you've got a website or a blog, you've got. social media stuff. You've got code embedded on there. You've got the video players. You've got notes for the show. And so you're probably not interested in switching podcast hosts, even though it would be easy to do so, maybe say like a bank account, because there's just a couple hurdles to get over and you'd have to go rewrite all that code. You'd have to kind of redo all the show notes. You'd have to tie it to your website again, that kind of thing. So it makes it kind of a pain. And what Libson is really focused on now is probably not causing people who are already hosting a podcast somewhere else to switch, but really trying to capture more of the

new user growth. And in addition to that, and speaking to some of the moves that they've made recently, I would say that they're focused on, again, continuing that new user sort of market share growth and also trying to help their current users and future ones monetize their podcast better. And they're trying to make some, they're trying to take some positive steps forward there to get a piece of whatever ad revenue is going to come into the industry soon. And also with their recent acquisition, take a cut of maybe like any Patreon style stuff they do where if you want to access somebody's premium content, you could go into now glow, but a part of Lipson, you could pay to access somebody's premium content, and then Lipson would maybe take a cut of that. So it's a fair question, and it's definitely like a competitive risk, but the people that I've talked to throughout the industry have kind of pointed to Lipson, like the most top-of-mind sort of podcast hosts for the serious user.

You know, one of the advantages of having that sort of first-mover quality is that they built up this network over time where they host a lot of industry events during the year. They have Facebook groups. They have mentorship groups. They do a lot of stuff to help content creators. And even one of their VDs, a guy named Rob Walsh, is considered like a godfather of podcasting. And he spends a lot of time doing like customer output. subscriber outreach and doing a lot of stuff with the customer base and trying to recruit new users and that kind of thing.

And while that's a little bit harder to quantify just because I think they're like 800,000 podcasts out there, so it's hard to determine kind of what the growth of new users will be moving forward and what Lipson can capture. I'd say that their sort of installed base of shows should provide a nice leg up for people who want to start a podcast and who are looking for a host and also for them to hopefully capture some of that ad revenue moving forward. But, you know, to your point, it's definitely a risk, and it's a super competitive space, as I mentioned. So I've got several other questions, but one thing you mentioned a couple times, as you said, Lipson is the platform for serious users, which I'm not a full-time podcaster, so I won't take too much offense to that. But when I think a series podcast, I think the Ringer podcast network, there was Gimlet, Joe Rogan experience.

And I'm sure dozens and dozens of others. But when I think about all those, and I can't say for sure, but, you know, Ringer got bought out by Spotify, Joe Rogen got bought out by Spotify. I don't think like ESPN. Or can you point to any like major, major podcast? Because I'm looking at their Q3 presentation. They've got a couple. And this is only ones that join.

joined in Q3, but like straight up with Stasi, which I'm sure is a very popular show. You know, that's the, I think that's the Vanderpump Rules Girl. I'm sure that's a popular show, but I don't think that's like the major category killing like Vox Media podcast, New York Times podcast. So can you point to some like of the really big podcast that are hosted on Lipson? Yeah, I used to have these like all top of mind in terms of like some of the bigger ones. And I know, I believe they did have Rogan actually initially. Oh, Rogan was on there until Spotify bought him?

yeah um so that would obviously be the biggest one but um i'd have to check my notes just because it's kind of falling uh kind of back and um i used to have a top of mind but i don't anymore not a problem not a problem let me ask another question uh you know this is a company i believe uh so just on the lips inside which is the side we're we're most interested in even though pairs uh which is different has some value you know lips and grew i think it was 15 percent 2018 to 2019, 2020, the growth is probably going to be somewhere in the 10 to 15% range. And nobody's scoffing at 10 to 15% growth, right? But when I think of the industry, in particularly 2020, you know, everyone in their

grandma was launching a podcast. I launched a podcast in 2020. Like I am a little surprised that the growth rate is only, quote unquote, 15%. You know, I feel like, yes, they're growing, but they're almost certainly losing lots of share if their growth rate is 15% because the podcast market is probably growing a lot faster than that. So when you look at that, how do you think about that growth rate when you're assessing the company? Yeah. So if you look back at the, you know, the last, I would say, two years or quarters or so, you do see like a steady trajectory of growth. But I would say to your point in order to achieve

one of like the higher revenue multiples or free cash flow multiples, we probably have to see growth rates a little bit higher. You know, it's definitely, I would say of all the KPI's to look for in terms of how the business is moving forward. That's one of the biggest ones. We're going to have to assess when the new financials come out and we get a sense of like how the core podcast hosting business is growing. I'm going to have to assess how much damage the lack of sort of effort toward the product and the customer and sort of growing their share over the last year or so has hurt them because there's clearly there's a ton of competition and that's got to be contributing to some of those decreased growth rates,

especially if you're looking back from like 2016, 17, 18. But, you know, I probably don't have a good answer for that right now, other than it's something that I'm really monitoring closely. And I think if we were to start to see those rates dip below a certain amount, it would definitely change things for me. You know, the people that I've talked to throughout the industry and from what I understand and what the management team thinks, they feel fairly confident about Lipson's ability to kind of return to grabbing some share

and a little bit higher growth rates. You know, recent trends probably aren't great. And Anchor has become a monster, you know, partly why they were bought about. I think they're doing something like, I think once somebody from the industry told me they were doing something like 80,000 podcasts like a year or something in some insane number like that, how many of those are serious or will ultimately be paid or how high their turn is, I don't know, but I think with Lipson's acquisition efforts, maybe they're kind of trying to acquire a little bit of growth, too, if the core business isn't moving in the direction

they want. I know with Ox Bus, which is one of their recent acquisitions, that's kind of like an anchor-like platform. And the management team pointed to hopefully doing like 10,000 or so podcast on their year, which is obviously a number of far below anchor, but they don't think that number is sustainable for anybody, including anchor. So I would say that it might take a few quarters to shake out in terms of what we see, but you bring up a really good point. And I would say, I would say for this to really work out well, like blue sky scenario, we would definitely have to see those growth rates had up about 15% for a little while. And, you know, I feel confident that they can kind of accelerate things myself, but again, it's something to watch for

sure. Yeah. No, I'm glad you mentioned those acquisitions because, A, you know, you and I decided to do the podcast a week or two ago. And I think Lipson announced two acquisitions in the past week. So it was almost like they were just going to announce one every day until we got to take. No, I want to keep building on the point because the company that comes to mind when I think Lipson is, you know, I was trying to think like pattern recognition style. And The company, both on the upside and the downside, I kind of thought of, was Dropbox, right? I'm not sure how familiar you are with it, but Dropbox, and this is a name. I still own a little.

It's been a little disappointed for me, but I do think it's interesting. But, you know, Dropbox, big user base, decently sticky product. You can switch if you want to, but, you know, it's a headache. And the thing with Dropbox that I think has changed the narrative recently is they started doing acquisitions and they say, hey, we've got this huge user base. All of you guys are modeling us in terminal decline. because, you know, people are worried Microsoft's going to give you free storage. Google's going to give you free storage. Everybody models Dropbox and Terminal decline.

What they're doing is they're saying, hey, we don't think we're in terminal decline, but we're going to go buy these interesting growth assets, plug them into our distribution, accelerate that distribution, and they'll get us back on a growth trajectory. So when I look at Lipson, I kind of wanted you to comment on both sides of that equation, right? So there's the acquisition angle where very similar to Dropbox or a lot of other tech companies. They can go buy, plug things into their distribution, their huge user, base, they're sticky user base, and maybe accelerate growth that way. But on the other end, when I look at Lipson, I say, hey, and we'll talk more competition in a second, but I do say, hey,

this is a small hosting company, similar to Dropbox. In the long run, why isn't the end game, Amazon, Spotify, Apple, whoever you want to say offers hosting for free. And I'll dive more into that in a second, but hopefully you can touch on both those points. Yeah, I think on some level they are competing against free, which makes it tough. Anchor is a really good example of that. just because, like I mentioned, you can download an app, you can pull it up, you can hit record, and you can distribute to, I think, whatever you want. Once you're finished, then that's difficult to do. You may have to dig a little bit deeper if you're serious,

but I'm sure they're serious users who use Anchor and who've gotten value out of it. I'm less familiar with Dropbox, unfortunately, but, you know, I would say that contributes maybe to some of the decline and growth rates and if they're competing against free offerings for people who want to do anything from testing a podcast, like trying it out, to becoming a serious user. Like you would probably have to experiment with something free or low cost initially. I would say that, you know, just to the acquisition point and competing against free and the growth rates kind of all tied into one, It seems like to me that despite the, or in line with the acquisitions and kind of cleaning up the business and stuff, the two activists involved, obviously, on a lot of shares and at some point we need to figure out how to monetize that investment, I would say that they're aiming to clean the company up and return it to sort of a positive growth trajectory so that they can possibly have some sort of takeout scenario.

Again, I think it should work out okay without that, but I would say among all the changes that are happening, it's hard to evaluate the financials because it's still a little bit early stages. So if you look at like some of the changes that they've made, you know, just in the last year alone or so, they've finally got control. The two activists finally got control of the business. I can even back up. So they're in the process of hiring a CEO. So all this stuff is taking place that's clearly being driven by. the board and the two activist groups. And I'm sure any CEO that they would plug in would be sort of kind of given some strategic

direction and then incentivized to kind of execute that. But yeah, so they're in the process of hiring a new CEO. So we kind of need maybe a conductor to kind of put all this stuff together that they're doing. The activists have control the business now. The foreign management team is gone. They've done little things in the last three or four months that in 2021, might not seem like a big deal, but to me they are, they redid their website, which made the sign-up and user process a lot easier, which where before it was a little bit clunky, there was a little

bit friction with the sign-up process. Who knows how many people, who knows how many potential customers they lost just because of that. I know when I'm annoyed at something, sign-up page or like filling all this data, I tend to just kind of put it aside. They recently just demoed a new, to that point, they recently just demoed a new version of their podcast. hosting platform, Lipson 5, which was attended by industry people and podcast hosts and consultants and everything. And they all gave it brave reviews. That was a big deal to me. And then there's a little bit of insider buying as well. And then they have these acquisitions that they made. So kind of putting all those pieces together, I would say like it's still kind of

pretty early just in terms of seeing how we can marry the business changes and trajectory with like the fundamentals moving forward. But, you know, if I, I'm asking somebody to value this the way I want it, then to and give it a high multiple, like I should be able to answer those questions. And it's difficult now with all the changes taking place and kind of seeing how much we can read into whatever the growth rates are when they file the 10K and measuring that up to, you know, historical ones. So it's definitely a difficult question to answer. And the idea, again, it comes back to the investment case. here, if we start seeing like a major decline in these growth rates or, or there's an understanding

that them competing against free is just like decimating whatever competitive positioning they did have, that's probably going to be it in terms of like the thesis being broken. But today, you know, it's still, while there are a lot of positives, it still remains a tough question to answer. Let me ask you know, you mentioned the CEO a couple times, right? The search for CEO. And you can correct me if I'm wrong. I believe the old CEO stepped away in late July or early August, right? And they've been hunting for a CEO since then. And since then, a lot's gone on, right? Like Lips and Fives coming out.

They've done three acquisitions, two of which were, they've done three acquisitions in the past month. Two of them were bolt-ons, but the, what was it, the advertised cast deal, $30 million deal. They raised pipe financing, you know, $30 million. It might sound small, but this, again, this is $125 million company. So that is a very significant acquisition. You know, there's all sorts of stuff going on with Spotify, all this sort of stuff.

So this is a company that rudderless might be too much of a term because I'm sure the board and the activists and everythings are involved. But this many deals and this much going on and this much changing strategically without a CEO, it just strikes me as weird. So my question would be, my question would be twofold. How do you think about all this stuff going on without a CEO? And then my second question would be, they're doing all this stuff without a CEO for six months. And is that indicative of maybe they're having trouble getting the right talent in here? because the talent is looking at some of the pushbacks that I'm giving you and saying, hey, I don't want to hitch my horse to that wagon.

That wagon has a lot of headwinds in front of it. Yeah, that's fair. I would argue that it kind of might swing the other way where they're looking for the right person and they need a unique combination of skills. And I would say that the business, I would say that the CEO post for them is really attractive. I don't know why somebody, unless somebody's taking a look, to your point at the business and going, this is a, you know, sinking ship and these guys have so much hair attached

and they're losing, you know, face every time Spotify does something, et cetera. I don't want to be involved because it taints, you know, my track record or something, which I really don't see happening because you have a business with a strong competitive position. You don't need to do anything, really anything with the capital structure or capital allocation stuff is, you know, minimal at this point. You don't need to clean up the balance sheet or the financials. It's growing and you kind of have a, if you're good,

you have an opportunity to kind of step in and kind of usher them along in this next phase of growth, whether it's with their core podcast hosting or ads or, you know, new ways to monetize, you know, the people I've talked to who have any sort of insight into like CEO hiring and that kind of thing, view this as pretty attractive. The feedback I've gotten is that the CEO position should look pretty attractive to most. And then I can say that just kind of like talking to the board and management, they're definitely looking for a unique person, somebody who's been a public company CEO before and wants to run a microcat, somebody who has ad tech experience, somebody who's a product person, and they're trying to fill in these holes

that the former management team was not, but also find somebody who has the capability to take them into this next step of their growth. It's funny that you bring that up because that's like another big risk for me is that I look at sort of the bigger picture here and I go, how have they not filled this position? Because if it was a good role that somebody wanted to step into, they should have no shortage of interviews or suitors. You know, I do know, I'm not an insider, but I do know that they're interviewing. And, you know, I know there's been a number of candidates. So I'm assuming that that will take place, the hire will take place sooner rather than later. In addition, I mean, they have a group of people in place

with the COO and CFO who have been there for a long time. And Laurie Sims, who's a C-O, she's really talented. She's really smart. She's been with the business for a number of years. And make no mistake, she's perfectly capable of running things and making these sort of strategic decisions and working with the activist guys on kind of how to take the business forward. And she's been really the one commenting on the acquisitions and some of the stuff that they're

trying to do. I definitely don't view her as a placeholder at all. I think that I think and hope that she will have a role with the business moving forward. whether they hire someone sooner rather than later. So, you know, and they hired a new CFO who came out of retirement, a guy named Richard Heiss, who has some really strong public company experience and thought the opportunity was really interesting. And so I would say, again, you know, all this stuff, I guess to point to your question

about making these acquisitions without a CEO in place, I would say that this was the plan all along. And they've been kind of surveying the podcast landscape. to see how they can compete with these other players out there and grow the business moving forward. And the acquisitions themselves, I believe, tie into sort of this shareholder lawsuit that is taking place and the amendment of their bylaws, which amended the voting power required to make some of these strategic decisions. And I think now, like right now is the time when they, number, one, have the resources and willingness to dedicate those to growing the business. And two,

they're actually able to do so given the voting power required to do such things. And again, we can get into this in a minute. So I think all those things tie in together. I've been a little patient about like the CEO hired myself. I pressed them, I think, enough for, you know, as much as I can. But again, that's a, that's a risk in something I'm on here. But I feel confident that they will have the post build sooner rather than later. Let me throw one other thing out, and you don't have to respond. But I almost think the recent deals that they've done, especially the advertised cast deal, which is the big one,

that was the $30 million and some major shareholders put in some pipe money to do it. I always think that would make it more attractive for a CEO to step in, right? Because I think last year you could look at this and say, hey, maybe I'm stepping in and hitching my cart to a horse that maybe it's losing share, maybe there's a lot of shareholder pressure to just sell the business and move on. But now, like, you, if you're a CEO candidate and you're brought in, you say, hey, these guys just put money into this. They're doing a roll of strategy.

I've got a blank. I've got a canvas to paint, and they've started to help me. But I'm not going to be under pressure to come in, clean this business up and sell it in three months. Maybe five years from now I will be or something. But, you know, I've got a clear path for the next couple of years to grow this thing, do strategic acquisitions, and really try to build it. So in some ways, I do, I think that could actually be helpful to the CEO process.

If you want to add anything there, you're welcome to. But I've got a couple more questions I wanted to ask you as well. Yeah, I think that's a good point. I mean, you know, at a high level, I'd love to just agree and say, you know, I think that makes sense. And it definitely kind of bolsters the war chest in terms of what they have to work with. You know, as a side note, one of the investors that participated in the pipe is a activist and investment group called Hudson Executive. capital, which I'm sure you've heard of. I'm actually invested, not directly, but invested alongside of them in USA Technologies Disclosure. I still own that business. And I know they're a group of

really experienced banking tech kind of guys who like to take activist positions and also make investments along in really interesting situations like this where they see, you know, pretty a good amount of blue sky potential. It's a very small investment given the size of what I know about them. So, you know, it's not to be taken too seriously, but the fact that they're involved is a positive. And they obviously, uh, they obviously participated before knowing about the advertised cast acquisition and alongside of it because the capital raise kind of came in conjunction with that. Um, and so I'm sure there's at least, I would say the management team would be wise to at least take some input from them. And I would feel comfortable with them doing that as

well because those guys are very smart. Um, but, uh, yeah, I would agree with you. And I think, um, end time will probably tell in terms of the CEO they hire and how it kind of fits into what they bought recently. I did see Hudson was part of the pipe. And was there like any connection between you and you said and Lipson connecting them to Lipson or was that just kind of purely coincidental? Yeah, it was coincidental. Okay, okay, cool. So let me ask the last thing. I mean, you know, when I think of this is a hosting company, right? And the only prior I really have for hosting companies on this is video, right? And with video, YouTube pretty much dominated the category, right? And YouTube had, they both had the consumer side and the demand side and it's free

to upload videos to YouTube and then YouTube monetizes with demand placement. And like, my worry with Lipson is the, certainly podcast players are much more fragmented than YouTube, right? But that's kind of because YouTube created. You've got Apple player, Spotify, probably some Google, but there's not that many of them. And my worry with Lipson is the end game here is very similar to the YouTube end game. You have a host who controls the user. They let you upload for free because they've got great monetization. And I can even point you to Spotify is over there. You know, they took Joe Rogan out of the supply. They took the, they're taking a lot of the ring or out of the supply. I could point you to an end game where Spotify lets everyone upload for free. So they kind of undercut Lipson on that.

And in fact, very similar to YouTube, they'll pay you to upload to Spotify because Spotify, can start dynamically inserting advertisements, getting huge rates because they've got so many people and they control the consumer. Even if Lipson tried to match them, Lipson doesn't have as much information on the ultimate consumer so they can't dynamically insert or target as well. So I could show you how Spotify with their push and they've got anchor and all this sort of stuff, they could kind of undercut them on price, pay better, better hosting, and that is the end game and Lipson's kind of dominated by them. So how do you think about the competitive risk specifically Spotify. Yeah, man, you bring up some really good points and questions and I mean, you know, just

at a high level, it's a risk. I think the better move would be for Spotify to buy them. And I'll have to get back to you on the like top shows that Lipson has, but you would immediately have an accretive group of people who have shows, websites, they pay per month to host that you can roll into your platform in a pretty accretive way because the cost to do that. it would be very minimal. And you would get, I mean, with pair included, you would get something like 80,000 subscribers immediately. So it's kind of interesting while they're competing.

It's, I don't know if Spotify is looking at Lipsin with their $25 million in revenue and going, okay, we need to crush these guys. Maybe they are and it might be easier for them to do that than I think. But I think the better move would be to kind of wait all this stuff out, see how things shake out with this actual business because you know that people, all these acquisitions taking place and the industry is consolidating, you know that people are keeping an eye out on the first mover in this entire thing. And to see how they do, I think the story, the share count, the capital structure will be a little more clean for people to kind of evaluate

what it would look like if they purchase the business. But yeah, I mean, it's a good point. The competing against free is a big risk and how Lipson responds to that. by either making having some free offerings themselves to grow the subscriber account and seeing if they can convert them or pushing hard into other avenues of monetization like taking a cut of that revenue which is would be really tough to kind of replicate what they have in court podcast hosted or again taking a cut of like patreon style stuff that they're doing with glow which is would be hard too because glow is a small business it was a really kind of like tiny bolt on thing but um but yeah I think it's a good question, but to me, the better move would be for somebody to scoop

them up and say, now we have a great hosting platform. If we need it, we have all these subscribers. We have some of the top rated shows, and we can kind of just roll this into our structure. Yeah, no, to me, it all comes back. Everything comes back to price, right? And as you're saying, if you're Spotify, this might end up being a buy versus build scenario. And the great thing here is you're paying five times revenue. And, you know, maybe I think I had it at 15 times EBIT. Obviously, there's acquisitions and stuff that will change those numbers a little bit, but you're not paying a huge price. And when you look at that and you look at, you know, five times revenue, pretty much all that's going to be, all that revenue would fall straight through to the bottom line for Spotify

if they bought them. Like everything's a synergy pretty much. So I do think the right thing is, hey, it's a buy versus build. And the buy is pretty cheap if you're looking at it from Spotify's angle. Yeah. And that's a good point. And I don't think they would have to pay much relative to what they've been paying for some, you know, some other things. They paid, what, 100 for Joe Rogan himself, obviously, you know, like the most popular show in the world, but just in terms of willing, what they're willing to spend is an interesting way to kind of look at that. And even Anchor, like with what they're trying to do with their actual platform outside

of podcasting, which is keep you on there all day long for everything. They want to be in the car. They want to be, you know, when you're walking around, they want to be, you know, have you listening to podcast so that then you can transition to other things like, music and you don't have to leave the app. Even the anchor acquisition, I think they were just looking at the number of users who are signing up for the service and who are using it because nobody cares about the person who downloads the app, records three minutes about their cat and distributes it somewhere. That's not a real thing, but that counts as a subscriber. And if you

acquire that person and they are part of your platform now and they have to use your tools and your interface and that kind of thing, you have them on your place now. Then they maybe want to explore and look at the music and maybe you can convert them to something paid, et cetera. So it was a really smart thing to do. But again, it's, yeah, I don't think it's not really apples to apples with lips in it. I don't think they would be paying like a huge price for what I think would be a really solid play. But we'll have to see how that shakes out, I guess. And don't feel obligated here. I want to switch over to the lawsuit in a second. But before we do that, we've mentioned them a couple times, the three acquisitions. Is there anything else you want to add on the acquisitions

that we haven't touched on so far? Or do you think we've touched on those properly? Yeah, I mean, I feel like I barely had time to like analyze these things. For Glee, we've had, what, 24 hours. So I can't exactly blame you for no terms disclosed. They just mentioned the company in the website. I can't exactly blame you for not having anything. But I just wanted to make sure there was nothing. I know. It's funny because you message me and said like, you know, these guys made an acquisition a day before we were doing the podcast, and I'm like scrambling, trying to find some details and, you know, get some, uh, the term disclosures and all that stuff. And, uh, you know, maybe we'll have to revisit that at some point. But, uh, but, uh, but yeah,

I'm excited about some of the moves in making. I'm a little surprised by the pace, to be honest. And, um, you know, it will be interesting to see, uh, this keeps up. But, uh, you, and again, we'll have to see. But ultimately, I think that all of them will be a net positive and kind of, at least put them in a step in the right direction in terms of like getting to this place where everyone wants to get to where programmatic advertising or something becomes a real thing in podcasting. Perfect. All right.

So let's turn to the last angle. And this, you know, it's funny. We're, you know, 45 minutes into the podcast and we're about to start talking to the lawsuit. And I think there are some lips in investors. And I would probably put you in this who like the business, the growth angle and the lawsuit is a free upside kicker. And then there are some Lipson investors who I talk to who they don't care about the business or anything. The lawsuit is the really interesting part of the business. And I know the lawsuit is

complex. It's everything. But if you can just give a brief overview, what is this lawsuit and why are some investors so excited about it? Sure. So it actually, it's funny that you mentioned that second group of shareholders, too, because there's, obviously, the share count is increasing now with some of the recent moves they've made. So it becomes a little bit more different to evaluate just in terms of where we might end up with the ultimate results of this lawsuit. But so I would just say I mentioned earlier the group, the company FAB Universal that spun Lipson out in 2016. And basically, if you read the filings and go through and study the business, excuse me, you will without a doubt come across this name throughout the filings and throughout your research. And basically at a high level before becoming public,

Lipson was a subsidiary of this FAB Universal and FAB was public themselves. And at one point in their history, they purchased a business called Digital Entertainment International. And this was like a Chinese media business that turned out to be a fraud that was run by a group of people who are fraudulent. And the selling party for DEI, the group that sold to FAP or FAB, was issued 10 million shares of FAB. And when the fraud was discovered, the involved parties obviously went to prison, some of whom are like getting out right now. And FAB's share price plummeted and in order to isolate Lipson from this FAB mess that was taking place, they spun it out, or what I think was to salvage whatever value FAB they had left.

They spun out Lipson, and the shareholders of FAB received one share of Lipson for every share of FAB to help. The above, or what I just read, ties into the former management team who were also a part of FAB, and then went on to run Lipson. And they had to settle with the SEC and they ended up forfeiting some of their shares and in line with the management departure. Recently, Lipson was able to cancel like

three million or so shares from, I believe, the former CEO. And obviously, they're no longer part of the business. So if you kind of fast forward to today, Lipsin, throughout all the stuff that they're trying to clean up with the business, filed a lawsuit against those former

digital entertainment international sellers, the ones who were given into FAB and then subsequent lips and shares. They filed a lawsuit against those guys, and it's about the remaining share counter parties, and they're now in prison, some of whom are getting out. So they still have the shares and technically still had the voting power until recently. So what the lawsuit is alleging is that the sellers of this DEI business that obtained the Lipson shares through FAB did so fraudulently.

which is true. So what that means today is there's like a million different details here. The Lipson is attempting to have all of those shares held by those people canceled. And I don't even know if there's any precedent for this. They've done their homework and speaking with securities lawyers and they've obviously made the lawsuit filings public and everything so you can review them. But it is possible to do where they've consulted judges and things like that. And they've said, they've explained the situation and said we can't it's going to take a while to sue these people or to go after them or to get them to forfeit their shares because laws are different in China and it it's it's just a big hairy mess that would take probably years and years so what they

like suggested I believe to the court or to the SEC was why don't are we just able to have these shares canceled and so that's really what they're trying to do to be fair the crux of the lawsuit is more about restricting the voting rights of the people who own those seven million shares so that Libson can continue to pursue strategic actions without, A, those people having any sort of say in what they're doing, and B, enriching these people who obtain the shares fraudulently should something positive happen. And so, you know, if you were to do the math, you know, when I originally did it, the share price, I think has changed a little bit over the last couple weeks, but seven million shares at the current share count represents something like 30%

of the shares outstanding. And so if those are to be canceled and you did the math, that would obviously automatically rewrite the share price based on the current market cap. So it's a really compelling situation that obviously offers sort of a free option that will not cost anything other than what it cost them to pursue the lawsuit. And the interesting thing about it is from my understanding is that, and I kind of put out like a little update recently where I said there's a non-zero chance of this happening. That's true. I just, again, I'm not a securities lawyer. I don't have any insight into the timeline of these kinds of things or if it's even possible, but it, or I'm sorry, if it even will happen, it is possible. And the timeline is up in the air. But if that were to happen,

again, seven million shares of the current 26 or so would get canceled. And you just have this really interesting dynamic where the share price, it's sort of worth like an immediate 30% return. But again, myself or even the management team probably don't have insight into like the timeline here, but it's an interesting situation that's developed, especially recently because now that they're making all these acquisitions, to me, something has either, either it's just the right place, right time kind of thing, or something has changed meaningfully to where they feel like they're able to pursue strategic moves now without having to worry about these outstanding party. So I find it to be a really interesting dynamic. And again, I would

pretty, I would view, I would, I like to quantify these things, but I like, I would view it as a free option. Yeah. No, look, I'm the same way. I love legal cases in public markets because I think they, they can be, you know, if you've ever, you're not a lawyer, right? I don't believe you're a lawyer. Okay. Like, I will research these legal cases all the time. And the thing is, these things are, they're massive. There's tons of documents. A lot of the documents are just spoiler played and then buried with them. One will be this really interesting thing. Like, I love bankruptcy cases, all that. So I get that these things are complex and everything. So if you don't know the answer to this, like, no shame. I view it as a free option as well, to be

honest with you. But my one thing here, there's a couple things. But my one thing here is like, you know, if I bought a company for you for a million dollar, a million of my shares, right? Unless I had a legend on that that didn't let you trade it, that didn't let you trade it, right? you know, two years later, I come back and I say, oh, you know, the deed on this wasn't good or Adam defrauded me or something. If I didn't have that legend, you could have sold those shares, right? So I could still go after you, but I need to get the cash. And with this, with Lipson's lawsuit, like these are Chinese investors. And I believe they're past the point where they would have that legend that would restrict them. So Lipsin, to me, I think they'd be

going after them. And the Chinese investors say, we don't have those shares. So the judges say, I can't cancel them because they don't have that shares, right? Because if my friend Chris had bought the shares from you, I can't exactly go cancel the shares from Chris just because it'd be impossible to track it down and everything. So I'd have to go after you for the money. In this case, it's Chinese investors. If you assume that those shares can't just be like freely cancelable, I'll call them for some reason, like you'd have to go after them for the money. And these guys are fraudsters over in China. The odds of you recovering from them are probably pretty slim. So I guess that would be my pushback. I don't know if you could respond to it or if you think like there's

there is a restrictive ledger on this or something. But do you know? And if not, again, neither of us are the lawyers. I think both of us viewed this more as free upside. But please feel for it. Yeah. First of all, you're a sick guy if you like to come through legal filings because I can't make it that far. I'm in the process. I don't enjoy it. But I will say like one of my big wins last year was Garrett Motion, right? And GTXMQ and it was in bankruptcy. And I'm just going to throw out another. It still trades, but disclosure, bankruptcy, risky, nothing investment advice, all that for everyone. But if you look through the filings, there was all, you know, 99% of it would be boilerplate. And then one of it would be this thing. Oh, yeah, by the way, the person who

is buying us thinks we're worth $5 per share. And in this cash out will be worth. And the shares were trading for $3 per share. And that's a hairier different situation. But I just find like legal filings, if you're willing to comb every now and then, you'll find some alpha, very differentiated. It is a very non-correlated with the market. So I do not enjoy it, but I do find it to be pretty lucrative sometimes. Yeah, that's fair. In this case, I've gone through illegal filings up to a point and I don't see anything that would help mitigate what you just said. It is a risk. I've asked the management team and have not gotten the answer I'm looking for. So I don't know the answer as a short answer. But look, I mean, to be fair, I made what I just said, I made it sound pretty

linear, right? Like, this has to happen, then this could happen, then the shares work more, 30% of the shares could be canceled. It's anything but is the truth. Really, again, the aim for the management team, and I want to stress this, is to be able to pursue strategic actions without having to contact, you know, people who obtain a bunch of the shares that they are outstanding fraudulently. But again, you know, there is a scenario where this does happen. I just, the timeline and the complications involved are probably a little bit above my pay grade. Makes sense to me. It makes sense to me. Anything else you want to talk about with Lipsin before we read this pod? No, I don't think so. You asked some really great questions. And again, I appreciate you having me on. But I think we covered everything.

Hey, well, I appreciate you coming on. And look, I think the rest of your portfolio is very interesting. You set, I visited a couple years ago. It's tripled on me. So I'm kicking myself. But I might try and drag you back on here to talk you set sometime. You and I were talking free. I'm very interested in free. So we're going to have to drag you back on here. Click, anyone who listens to this and wants to reach out to Adam, I'm going to be sure to include his stuff in the show notes. And I mentioned this particularly if you've got a view on the legal case. Reach out to Adam, reach out to me. We can get that discussion going. But, you know, Adam Wilk, Graystone Capital.

Really appreciate you coming on. And again, we'll have to have you on again. My pleasure. Thank you so much. This has been great. Thank you.