Economic and Financial Analysis of Zinkia Entertainment S.A.

Abstract

One of the critical aspects for the good progress of companies with growth potential and which are in their expansion phase is the ability to find funding sources. These companies usually have interesting products, with a already existing business model, although they need to obtain more external resources in order to explode and become larger companies. There comes a time when the contribution of the partners who run the company or the potential benefits the company has obtained in previous years are not enough to enable the company to take the next step in its natural path. In order to get this financing, the companies have several options in the world today, each with its pros and cons, which the companies themselves should take into account. In addition, it is especially important evolution in terms of results of the exercises the company develops. These results can mark out, of course, the path of society and its funding needs in coming years. This situation is what we see in the company we will talk about in this document, Zinkia Entertainment S.A. A company with a thriving product in its field, which is beginning to gain international recognition and which needs an extra push to liberate all the potential of a newborn trend. We will see which decisions the company administration takes, how the company walked the first steps in the search for funding and what different path the company chose at any given time. We will reflect on why the company decided to carry out a change of strategy and we will think about the consequences those decisions will have in the coming years. We will also discuss the situation of the company before and after the decisions taken, and what is the company situation when the results turn out not to be the expected ones. In this process for raising finance, external entities were involved, and we should also focus on them briefly. So, we will describe what additional options Zinkia has as a part of a stock market as the AIM. Also, we will detail which differences exist between this market and other better known markets, and if these differences may have been meaningful when explaining the situation the company undergoes nowadays. In addition, we will see what happens when a body such as the CNMV gives a negative judgment when a company in a difficult situation, as Zinkia, tries to capture funding. On the other hand, the importance of shareholder stability within a company trying to expand should also be remarked. This does not happen in Zinkia, and we shall describe briefly the struggle for power, which is still in force in society; a struggle, compounded by the decisions of a president who makes decisions with the sole support of majority shareholder, against the opinion of other important at a particularly delicate moment in the life of Zinkia. In order to analyze the path of Zinkia, we will structure information as follows. First, we will briefly describe the objectives of this document and the methodology to be followed. Then, we will divide the path of Zinkia into three sections. In the first section, we will narrate the situation of the company since 2008 until the end of 2010. It is at this time, at the end of 2010, when Zinkia changes course regarding its funding strategy. After this first block, we will analyze the situation of the company since late 2010 until the end of 2013. At this moment, the most critical time for the company occurs, which marks its evolution to the present. A failed attempt to get more funding requires the company to enter a pre-arrangement with creditors. In the third section, we will describe the situation of Zinkia since the pre-arrangement with creditors until today. Although we only have the annual accounts until 2014, we will see how the arrangement with creditors ends and what is the situation of the company today. Finally, we will dedicate a section to analyze the AIM, describe some of its differences concerning regulated markets and reflect on how these differences can foster cases like Zinkia’s.