Veritone Inc.’s $37.5 million initial public offering last month has tied the company’s fate with another Newport Beach technology company.
The IPO for the cash-strapped startup unlocked nearly $30 million in warrants held by Acacia Research Corp., which typically is in the business of licensing patents and litigating infringement claims since its 1992 inception.
The notes, which were secured by all of Veritone’s assets, were scheduled to be repaid by Nov. 25 but were converted into Veritone common stock following the offering, according to regulatory filings. That debt and warrant conversion, coupled with an agreement last year to make two convertible $10 million loans to Veritone, position Acacia as the company’s largest shareholder.
Acacia would own about 31% of Veritone capital stock after the offering, with “significant control” over business operations and matters requiring stockholder approval, such as directors, corporate transactions and securities rights.
Acacia has already exercised some of its influence, nominating two of its three board members: Edward Treska, Acacia’s general counsel, and Frank Walsh, vice president of Jupiter Capital Management Partners LLC in New York and who’s on Acacia’s board.
Veritone posted sales of $8.9 million last year, primarily through its ad-placement business, but aims to ultimately provide artificial intelligence insights through audio, video and structured data. It entered the year with about $12 million in cash and a working capital deficit of $21.2 million. Its accumulated deficit is roughly $43.6 million.
Veritone said it received $66.3 million in total net proceeds from the IPO, the warrant exercise and a line of credit funding.
Shares were offered at $15 and opened as high as $15.64 on May 12, its first day of trading. The following trading day, they fell as low as $10 and have since bounced around to $13.66 with a $190 million market cap as of the close of May 31. Volume has steadily declined from 1.6 million shares on its first day to under 100,000 shares daily through the week of May 22.
UCI Esports
The growing influence of competitive gaming and its deep roots in OC were on full display at a recent symposium hosted by University of California-Irvine’s esports program.
Business executives, academics and students heard several panels dedicated to the booming segment, from developing social research studies on gamers to breaking down stereotypes and emerging business models and opportunities.
“Esports are becoming on par with professional sports activities,” said Walt Scacchi, a UCI senior research scientist in the Institute for Software Research and Director of Research at the Center for Computer Games and Virtual Worlds.
The university is believed to be the only one in the nation to offer scholarships for competitive gaming and operate its own esports stadium.
The 3,500-square-foot iBuyPower Arena includes 80 custom PCs from iBuyPower in City of Industry and a live webcasting broadcast studio. It cost about $250,000 to build.
Irvine-based Blizzard Entertainment Inc., which has developed several esports hits, and accessories maker Kingston Technology Inc. in Fountain Valley are among several local companies involved in the trend, which is attracting stadium-size crowds to venues and millions of online viewers.
Codenvy Sold
Count another exit from Vinny Smith’s Toba Capital in Newport Beach.
San Francisco-based Codenvy, which has had Toba as an investor since early 2013, was sold on undisclosed terms to Red Hat Inc. in Raleigh, N.C.
Toba led a $9 million financing round for the software maker, which provides cloud-based services to code, build and test apps and now has 50 employees. Red Hat provides open-source software that competes against Microsoft Corp.’s Windows operating system.
The Business Journal last month reported that Toba’s venture capital portfolio has grown to $800 million, with about $600 million invested, up about 33% on both fronts in the last year.
Smith launched Toba in late 2012 with former colleagues at Quest Software after his Aliso Viejo-based company was taken private in a $2.8 billion acquisition by Dell Inc., netting him nearly $1 billion.
