The Mormon-founded Angel Studios was the initial home of The Chosen series but has since emerged as a player in the film distribution industry. And similar to what kickstarted The Chosen, Angel Studios is going public with their stock in order to raise up to $20 million. Angel Studios was the 8th largest film distributor in the United States in 2023.
How It Works
Regulation A is an exemption from the registration requirements of the Securities Act of 1933 that allows companies to offer and sell securities to the public without having to go through the full registration process with the Securities and Exchange Commission (SEC).
There are two tiers under Regulation A:
Tier 1: Allows companies to offer up to $20 million in securities within a 12-month period, with no restrictions on the number or type of investors. Companies conducting a Tier 1 offering must file an offering statement with the SEC and provide investors with an offering circular.
Tier 2: Allows companies to offer up to $75 million in securities within a 12-month period, with some limitations on the amount that non-accredited investors can invest. Companies conducting a Tier 2 offering must file an offering statement with the SEC, provide investors with an offering circular, and make periodic reports to the SEC.
Both Tier 1 and Tier 2 offerings are subject to certain disclosure and reporting requirements, and companies must ensure that they are in compliance with these requirements throughout the offering process.
Investors in equity crowdfunding campaigns receive preferential treatment on distributions until they achieve a return of 1.2 times their initial investment.
Angel Studios is attempting to raise just under $20 million by selling 661,375 shares at $30.14.
To calculate the market capitalization of the company, we need to multiply the total number of outstanding shares by the current price per share. In this case, we are given the total number of authorized shares, but not the number of outstanding shares.
For the purpose of this calculation, let’s assume that all of the authorized shares are outstanding. This is a simplification, as companies often have authorized shares that are not yet issued or outstanding.
The total number of authorized shares is 85,000,000. If the common stock is currently being sold for $30.14 per share, then the market capitalization would be:
85,000,000 shares * $30.14 per share = $2,561,900,000
So, under this simplified assumption, the market capitalization of the company would be approximately $2.56 billion. However, it’s important to note that this calculation assumes all authorized shares are outstanding, which may not be the case. The actual market capitalization would depend on the number of shares that have been issued and are currently outstanding. But it’s suffice to say that the 661,375 is likely an insignificant percentage of the current shares issued.
Analysis: Do NOT Invest
Angel Studios has made it clear that they do not intend to pay dividends on this stock and the holding value of the stock is the only real value. Of course, the ability to sell publicly owned but not publicly traded stock is not easy, giving the investor little liquidity, something Angel Studios readily admits. Moreover, they do not provide a valuation or financial statements for investors to consider.
Angel Studios made a lot of money off of Sound of Freedom, a project they distributed but did not produce. This success has elevated their status but it’s likely unsustainable. Earlier this year, they distributed Cabrini, a feminist film that lost at least $30 million at the box office. The decision to spend $50 million on a film that lacks mass appeal is a clear error in judgment, although not one that Angel Studios made.
Sound of Hope: The Story of Possum Trot was made for a reasonable $8.5 million but earned only $11.5 million at the box office. This movie might have benefited from the name being associated with Sound of Freedom, yet still underperformed. It doesn’t help that the producer, Letitia Wright, complained about the film being advertised on Daily Wire.
Sight earned $6 million at the box office off an unknown budget. The Shift earned $12.2 million off a $6.4 million budget The documentary After Death grossed $11.7 million, likely being the most profitable project since Sound of Freedom distributed by Angel Studios. Simply put, there’s little reason for optimism that with even more films Angel Studios will increase its revenue.
These box office totals, along with a streaming platform with 345,000 members do not signal revenue growth. Angel Studios is doing this with the Sound of Freedom being a one-off event windfall that they seem unable to replicate. And the 2022 revenue was likely largely enhanced by The Chosen, with whom they’ve parted ways. The best chance is next year’s Young Washington, which by its title seems to not be about the American Revolution, and David which has raised $54 million in its equity crowdfunding campaign. In short, 2025 looks more promising than 2024, but Angel Studios will likely lose market share going into next year.
So far, 2,326 people have invested an average of $1784 in Angel Studios to have raised over $4 million. The film industry is constantly changing and there is little reason to justify the almost certainly absurd valuation Angel Studios has bestowed upon itself. And the ability to sell tickets via preorder that have a higher likelihood of going unwatched is not a reliable value proposition.
Overall this investment has no liquid or cash flow value, which is against my personal investment strategy. It would be a long holding of unrealized gains. But more cynically, this seems less about raising the necessary capital to increase market share and more about securing an audience devoted to the company and consuming its products out of a sense of ownership. For these reasons, Angel Studios is not a sound investment and should be avoided.
