After picking up a new management team and additional board of directors, stagnant video gaming firm Majesco Entertainment Co. (NASDAQ:COOL) just landed key insider investments totalling 9.9% of shares outstanding as of May 9. Leading the aggressive accumulation is the legendary biotechnology investor Dr. Phillip Frost, CEO of Opko Health (NYSE:OPK) and former CEO of generics giant Teva Pharmaceuticals Industries Ltd. (NYSE:TEVA).
Frost picked up a 10% stake in Majesco on May 9th, and while this could be seen as just another insider move, investors should keep in mind that Frost is currently ranked #1 of over 35,000 corporate insiders on TipRanks.
Frost and Co-Chairman’s of COOL have worked together at a host of companies across the last two decades, with some of the more recent being Chromadex Corp (NASDAQ:CDXC), CoCrystal (OTC: COCP) and Opko Health Inc. (NYSE:OPK). The Co-Chairmen founded InterClick, a company in which Frost invested shortly after and which Yahoo! Inc. (NASDAQ:YHOO) acquired at the end of 2011.
The prolific pair have teamed up again, this time in the entertainment technology space on Majesco. In October last year, Majesco announced a revamp of its leadership team, which included the hiring of Honig as CEO. The revamp came at a time when the company was looking to restructure its operations and return some value to its shareholders.
Frost’s 10% stake in the company sees Frost become Majesco’s largest external shareholder, and is an encouraging sign going forward .More recently, and as part of its restructure, the company has shifted focus away from physical development towards digital only production and distribution. With the increasing popularity of digital streaming gameplay, this shift has two primary benefits. Digital media is of course far cheaper to produce and distribute than is physical product, however long you’ve been working with an established distribution chain. An independent developer can build a game and publish it via a host of online channels for free, and start generating revenue instantly, with very few barriers to entry.
Finally, let’s get back to Frost’s involvement. At last count, the company had a little over $6.6 million cash on hand. While it is working to rein in costs, and the shift to digital production should facilitate the shift, it is likely to require an injection of capital medium-term in order to fund the development of new media. More often than not, this sort of injection would come from a public share issue – something that could dilute the holdings of any early-stage investors. This is a pretty well established risk at this end of the public market. With a billionaire backer such as Frost, however, there is the potential for capital raise without having to turn to public retail investors.
This is only one of a number of benefits. Frost’s experience with small public companies will be valuable to say the least, and his long-standing history with Majesco’s management team will prove to be valuable for the company.