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iHeartMedia will invest $10 million in High Times in a no-risk, all reward deal for the radio giant

Earlier this week iHeartMedia Inc. (OTCP: IHRT), the largest radio brand in the United States agreed to a deal with the publisher of High Times Media, trading off $10 million worth of advertising in exchange for a 5 percent stake in the company.

The deal follows Hightimes Holding Corp. announced earlier this summer that the company would be going public and gives the grandaddy of cannabis publications a significant platform in which to peddle shares of the company. On September 11, the Board of Directors voted to extend the investment period, giving themselves until the end of October to find investors. If High Times can raise the necessary investment funds for a public listing by Halloween, some experts believe they could raise their value to over $280 million.

[PepsiCo says no to pot (for now), and the market goes tumbling down]

Currently, High Times has a valuation of $225 million while reporting over $14 million in sales last year. Using a regulatory shortcut known as Regulation A+, which allows them to sell limited amounts of stock prior to listing, the company has raised $12.5 million from 9000 investors to date.

Photo James Cridland

What’s in it for iHeartMedia?

It is safe to presume that those numbers alone would not be enough to attract the attention of iHeartMedia, a company that filed for bankruptcy no less than seven months ago. It is more likely that High Times’ strategy for expansion sealed the deal.

The advertising agreement between High Times and iHeart, dated September 26, happened simultaneously with High Times’ acquisition of DOPE magazine. According to a statement, the move solidified the magazine’s advertising opportunities along the west coast, including Seattle and Portland.

[IGC’s cannabis-infused energy drink leads to explosive stock gains]

“DOPE is a very strategic acquisition for our portfolio offering key complementary assets to our existing platforms and opening the opportunity for economies of scale to improve performance,” said High Times CEO Adam Levin. “What DOPE Media has built in such a short time is not only impressive, but needed considering the difficult landscape and legislation brands are faced with today. We look forward to not only combining our resources but expanding them.”

For iHeart, investing in High Times is an opportunity to dip their toes into the cannabis sector without having to worry about the burdens of federal regulations in the U.S. The radio conglomerate was buckling under $20 billion in debt before filing Chapter 11 bankruptcy in March. Now they can try and play in the cannabis market at a relatively low price — it’s a no risk, all reward situation for the company.

Photo iHeart Radio Music Festival 2013/ kennejima

iHeartMedia makes a safe bet

With 850 radio stations and 200 different platforms, including live events, iHeartMedia does possess a significant portfolio. Adding High Times only makes them that-much-more accessible to the modern audience. iHeart already has a following of 129 million on social media. It gives High Times a wider audience, but at the same time, it makes iHeart a part of the growing cannabis conversation that is currently overtaking North American stock markets.

The growing interest in cannabis and cannabis-related media will only grow bigger once recreational marijuana hits Canada next week. High Times is already betting on this, and a statement from Hightimes Holding Corp. President Vicente Fox Quesada sums up the cannabis company’s optimistic outlook for the future.

[Experts debate why Canopy Rivers is down 50 percent post-RTO]

“At a time when nearly two-thirds of the United States have legalized some form of cannabis, and the U.S. Congress is considering giving all states control over legalization decisions, this is the right time to invest in the business of cannabis,” said Quesada in a statement. “As we move out of the shadows, real businesses in this sector will prosper in a way most industries only dream of.”

iHeart’s investment in High Times is representative of a shift in public attitudes towards marijuana. It aligns the iHeart brand with a more modern way of thinking, while still keeping the company away from any real risk. Evolving with the fast-pace of today’s market is precisely why the country’s largest radio company is investing in a marijuana magazine, and yet, if it doesn’t pay off, it won’t hurt them that much.

 

*Header image by Jeffrey Beall

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