Anghami (NASDAQ: ANGH) stock is up 97% as a result of a deal with OSN. This price reaction in ANGH stock looks entirely reasonable to be honest, for OSN is paying a vast premium for its investment. So high that it almost looks like a misprint but it does appear to be the correct price. Clearly, OSN sees something strategic in Anghami, something that has passed by other investors.
The basic business background in that Anghami is trying to be the Spotify for the Middle East and Arabic speaking world. OSN is a TV and streaming platform aimed at much the same marketplace. We can all see some logic in pushing the same two technologies, lines of business, from the one corporate shell. That the two companies will remain separate, market separately, undoes some of that economic logic but there could well be significant savings on the production side. Maybe, at least.
The deal is: “Under the terms of the agreement, OSN, a subsidiary of Kuwait-listed KIPCO, will “inject up to USD $50 million” in Abu Dhabi-based Anghami for a majority stake in the music streaming service, OSN’s parent company said in an investor filing on Tuesday (November 21).” The stock exchange announcement of this is here.
Anghami stock price from Google Finance
What has driven the Anghami price up is the price that was paid for that stake. “The OSN Group is investing in Anghami at a valuation of $3.65 per share, or 3.9 times the stock’s average price for the past month, OSN said.” That’s a very big premium for control. Very big indeed - so much so that it’s difficult to think someone is actually paying that. But it’s reported multiple times so we must assume it’s correct. OSN is buying control here, some some premium is justified: “Once the transaction closes, OSN Group will own a majority stake in Anghami Inc.”
We can see the business logic - well, perhaps we can - it’s that price paid which is the extraordinary thing: “The OSN Group will invest in Anghami at a valuation of $3.65 per share, 3.9x the stock's average price for the past month”. No, there won’t be a take out of extant stockholders at this price, this is an issue of new stock direct to the investors. But with a 4x premium for new capital no wonder the ANGH stock price has jumped.
