B2B digital music services provider 7Digital could be facing bankruptcy without a last-minute cash injection.
The UK B2B company says it is highly likely it will enter administration by July 31st without the funding.
7digital expected to issue more shares to raise the cash, but investors have now rejected the last-ditch proposal. With shareholders rejecting the bid, fundraising efforts are looking pretty grim.
Notes from the meeting posted today (Thursday) explain that the company’s directors are looking to engage relevant shareholders to get their support.
“The failure of the Resolution numbered 7 to be passed by Shareholders at the General Meeting, therefore, creates greater execution risk for any subsequent equity raise (a “Follow-on Financing”) by the Company since further shareholder approval would be required to implement this.
Clearly, the Directors are extremely disappointed with this unsatisfactory outcome and therefore intend to engage with the relevant Shareholders, where possible, to secure their support for a Follow-on Financing.”
eMusic president Tamir Koch has offered $1.6 million of the $5.5 million needed.
eMusic is planning a mass market distribution project using 7digital’s blockchain platform. But eMusic may not be in the best financial position to offer another struggling company money.
Last October, eMusic faced accusations of refusing to pay indie labels their royalties. Various labels and distributors, including The Orchard, Naxos, and others removed their content from the platform over the non-payment dispute.
Shares of 7digital have fallen 3.1% since the notice went live on the group’s website.
Don Cruickshank and Eric Cohen are also stepping down as directors of 7 digital. The company has appointed Tamir Koch and David Lazarus to the board. Mark Foster will act as interim chairman of the company for now.
In March, 7digital abruptly ended its partnership with Juke, a German-owned streaming music service. Despite a settlement of $4.5 million, 7digital still remains cash strapped.