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Greenhaven Road Capital’s View on Chicken Soup for the Soul Entertainment (CSSE)

Greenhaven Road Capital is the management company of the Greenhaven Road Capital Partners fund. Scott Miller is the fund’s founder and managing member. Recently, Greenhaven Road Capital released its Q1 2020 Investor Letter – a copy of which can be downloaded here. In its most recent Investor Letter, Greenhaven Road Capital announced that the Russell 2000 Index fell by 30.6% in the first quarter. However, the fund fell a couple of percentage points further over the same period.

In the said letter, Scott Miller highlighted a few stocks and Chicken Soup For The Soul Entertainment Inc. (NASDAQ:CSSE) is one of them. CSSE is an entertainment and media company. Year-to-date, CSSE stock gained 9.3% and on April 27th it had a closing price of $8.75. Its market cap is of $104.9 million. Here is what Scott Miller said:

“The most obvious is Chicken Soup for the Soul Entertainment (CSSE), which provides ad-supported video ondemand under a variety of banners, including Crackle. Not surprisingly, streaming hours have increased as people are shut in and every professional sport has been suspended. That is good for Crackle, but while a 20% or 40% increase in hours streamed for a few months is nice, it is not monumental. However, more important than this likely uptick in viewership, the industry is consolidating and every other independent advertising-supported network has been purchased or is in the process of being purchased. As the CEO said on the most recent earnings call:

“I’d like to spend a moment addressing the recent high-profile transaction activity in the AVOD and SVOD marketplaces, both rumored and announced. As soon as Comcast made the announcement about Peacock, industry peers realized they needed an AVOD strategy along with their SVOD initiatives. So then it becomes a question of build or buy. The reason you’re seeing so many acquisitions is that it takes several years to build a successful AVOD platform, rights to content and ad-selling machine, which would give — and an ad-selling machine, including relationships with resellers that provide access to local ad demand, are only a few of considerations. The combination of these attributes equates to speed to market, which would give the buyers essentially a multiyear lead.”

He went on to indicate that there are a dozen logical acquirers for their Crackle property. In March, Fox purchased a private competitor, Tubi, for $440M. This would imply a valuation in the mid-$20s for CSSE or almost 4X the share price at the end of Q1.”

Disclosure: None. This article is originally published at Insider Monkey.

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