The Jaxsta Ltd (ASX: JXT) share price is latest market minnow to grab attention following the spectacular rise of the Brainchip Holdings Ltd (ASX: BRN) share price.
The Jaxsta share price rocketed by over 300% to 11 cents during lunch time trade after it announced a $1.9 million deal with Songtradr.
Under the five-year agreement, Songtradr will pay an upfront licence fee of $500,000 to Jaxsta. In return, Songtradr will have the opportunity to provide a revenue identification and collection service for Jaxsta Pro users.
Convertible note already in the money
The service identifies missing performer income from sound recordings ("Neighbouring Rights"), which should prove popular in this COVID-19 environment with many musicians out of work.
Songtradr will also invest $1.4 million in Jaxsta through a three-year convertible note. The investment is already paying off given that Songtradr can convert the debt to Jaxsta shares at 3.5 cents a pop.
Big dilution could impact on Jaxsta's shares
If Songtradr elected to convert the entire investment into shares, there will be an extra 40.6 million shares in Jaxsta. That's a big dilution as that represents around 16% of Jaxsta's current share base.
However, the cash from the investment will come in handy even though it attracts a 7.5% interest rate.
Also, Jaxsta's shareholders won't be complaining as its share price was wallowing at 2.6 cents before the deal was announced.
Still sounding sweet to investors
Additionally, the transaction gives Jaxsta a new income stream as it can collect 20% of net Neighbouring Rights revenues received by Songtradr from Jaxsta users adopting the service after recoupment of the license fee.
"We believe this new revenue-generating product will also drive increased adoption of Jaxsta Pro subscriptions," said Jacqui Louez Schoorl, CEO and Co-Founder of Jaxsta.
"This partnership with Songtradr highlights the significant opportunities that exist in solving the data-centric challenges faced by the music industry."
Striking a high note
Jaxsta believes the global Neighbouring Rights market is worth a around US$2.6 billion ($3.6 billion).
"Jaxsta has solved a significant piece of the music industry data dilemma and has built a scalable technology solution that integrates neatly into our music rights ecosystem and licensing marketplace," said Songtradr CEO Paul Wiltshire.
Songtradr claims to be the largest B2B music licensing marketplace in the world. It provides music creators with a rights management and monetisation solution so that they can get paid whenever an advertiser, or media/gaming company uses their music.
Despite the big surge in the JXT share price today, the stock is still down by around 15% since the start of calendar 2020.
