Monster Products (formerly Monster Cable) was the maker of Dr. Dre’s $3 billion Beats headphones. At that time, the company claimed that it was duped by Beats co-founders Jimmy Lovine and Dr. Dre. They filed a lawsuit for a 5% share of the $3 billion that Apple paid to acquired the company, which they lost. Since then, they have had net losses year after year, losing $27 million in 2017, $29 million in 2016 and a net loss of $19.6 million in 2016. In an attempt to reverse the trend, Monster filed a S-1 with the SEC for a $300 million ICO, offering “Monster Money” (MMNY) to its customers.
The company filed an initial coin offering (ICO) rather than an IPO, to raise the $300 million, though it is reported that they are also issuing 75 million shares of common stock. MMNY will exist first as an ERC-20 token, on the Ethereum blockchain. As one of the most relevant brands in high-end consumer electronics, Monster has created products ranging from premium speaker cables to headphones and TV cleaning solution. With this ICO they are looking to create an ecosystem that will attract ecommerce businesses to the Monster Money Network, as they transition from a pure-play products company to a blockchain-driven platform.
The goal with MMNY would be to offer an alternative to traditional credit card processing solutions. Users will be able to transact using the branded cryptocurrency, while merchants save in processing fees.
According to the S-1 filing, Monster plans to shift focus away from building products to pursuing alternative retail platforms, such as ecommerce platforms, and to focus on marketing campaigns. Over the next five years, they hope to monetize their existing retail relationships, and to expand into new markets, including numerous Fortune 500 companies.
The company plans to use blockchain technology to advance their ecommerce and business operations. This includes tying the technology to their marketing, accounting, auditing, internal controls and shipping management functions. To accomplish this, the company has indicated that it must raise the full $300 million to develop the blockchain technology according to their existing plan. If they fall short, they will attempt to acquire additional funds through other sources, and if that fails, they may suspend their business.
Monster has indicated a number of risks associated with this venture. The most obvious risk is that users will not adopt the platform, and that there will be competitors who offer a similar service. They also see cyber attacks and theft as a risk factor, as well as issues with Ethereum that would be outside of their control.
This is a long-term plan, as the company does not expect any trading of the MMNY tokens on any of the crypto exchanges until June 30, 2020. Between now and then, there is also the possibility that regulations will become stricter. Should that happen, they have indicated that token purchasers would be able to convert their tokens into common stock.
The $300 million ask is a big one, especially since the tokens will not be available on the exchanges for some time. However, they do have a major brand behind the project, and we can expect that their marketing campaign will be fierce. The question is whether the utility of the coin is enough of an attraction for investors who won’t be able to trade it for a profit on the exchanges for as long as two years.