Previously, I wrote an article introducing Grom Social Enterprises (GROM, Financial) after the company got uplisted to the NASDAQ. The children's entertainment media company derives most of its core revenue from the Top Draw Animation subsidiary. The company’s social media platform for children has often been highlighted by the management as one of its most critical offerings to drive future revenues.
Grom came out with a series of press releases over the past couple of months related to its efforts at adding to the content of its social media platform, and the biggest update was the acquisition of Curiosity Ink Media, a content developer for kids. The company has gone on to establish some key partnerships post the Curiosity acquisition in order to bolster future earnings.
About the business
Grom essentially operates as a social media platform and original content provider of entertainment for children under 13 years old. The company provides a safe and secure digital environment for kids that their guardians can monitor by using a specialized tool. Grom Social Enterprises has some operating businesses, including Grom Social, that provide its content through web portals and apps to entertain children and let them interact with friends, chat with cartoon characters, access relevant content and play proprietary games while educating them about being good digital citizens.
The company owns and runs Top Draw Animation, which creates high-quality animation content for some of the major international media companies in the world, including The Walt Disney Co (DIS, Financial), Nickelodeon and Cartoon Network.
Grom Educational Services is another subsidiary of GromSocial Enterprises that provides web filtering services for K-12 schools, governments and private businesses.
The Curiosity Ink Media acquisition
In April 2021, Grom Social Enterprises announced its plan to acquire Curiosity Ink Media, a developer and producer of original kid-friendly content. The company produces feature films, physical books and television series for modern kids and families. According to the management, this acquisition will bring new opportunities for Grom Social, like original programming, including operating as an original content pipeline for SVOD (Subscription Video on Demand) services.
They also added that this move would allow the company to develop cross-platform collaborations where Curiosity’s content can debut on Grom. The company can also gain user feedback and help inform series development. Post this acquisition, the Grom management went on to undertake a series of interesting initiatives and partnerships.
Santa.com – a new addition through curiosity
In one of their recent press releases, Grom Social Enterprises announced that Curiosity is introducing Santa.com, an online hub where kids and adults can experience classic holidays like Christmas in a modern digital holiday venue. This platform will offer a special place to kids for registering their Christmas wishlists and also experiencing a virtual tour of the North Pole. Santa.com provides parents special tools so that they can send personalized wrapped gifts to their kids from the comfort of their homes. This amazing platform is going to be launching in the fourth quarter of 2021. The management is expecting that this online holiday hub can bring a unique experience to the market, leading to an increase in subscribers.
Moreover, the company also announced plans to produce an original animated musical holiday special based on the annual classics like “Elf” and “Rudolph the Red-Nosed Reindeer.” This production will mainly focus on the hub’s effort to modernize its North Pole workshop with the help of some technical upgrades. The company revealed that these upgrades would make the site more appealing to the kids. The launch of Santa.com is expected to give a push to Grom’s social media revenues for the Christmas season of 2021.
Dynamite Entertainment collaboration
Another press release from Grom notes that Curiosity Ink Media has recently partnered with Dynamite Entertainment, a leading independent publisher of comic books and graphic novels. The alliance's first titles are slated to reach shelves at the beginning of Spring 2022 and will bring Curiosity, which recently agreed to be acquired by Grom Social, squarely into the publishing ground.
The management also announced that Dynamite Entertainment would serve as the distributor of record for Curiosity’s comprehensive catalog of licensed properties as well as original content for publishing. Jon I. Rosenberg, the head Publisher of Curiosity, will lead the alliance in cultivating Curiosity Ink Media’s licensed and original Intellectual Properties (IP) into books and consumer products for modern generation kids and families. The main motto behind this alliance is to grow the industry by offering a diverse range of books to younger readers and encouraging them to read both children’s books and comics. It marks Grom’s entry into the publishing space on a larger scale and is probably a huge landmark for the company, which has always been focused on audiovisual content.
Final thoughts
As we can see in the above chart, Grom’s stock price has had a more or less flat trajectory over the past six months. Interestingly, on the valuation front, the company does appear to be cheap. Its price-book ratio of 2.22 is well below the Interactive Media industry median of 4.11, and the same goes for its price-sales ratio of 3.43.
It is worth highlighting that the company’s management is particularly strong and has a team of skilled professionals with prior experience in animation giants like Disney and Nickelodeon, led by CEO Brett Moyer. With strong B2B clientele for Top Draw and huge potential to attract more and more children as well as parents to its social media platform through original content from the Curiosity acquisition, Grom looks like a compelling microcap investment opportunity within the interactive media space.
