Scents from hip-hop powerhouses Shawn “Jay-Z” Carter, Rihanna, Kanye West and an unidentified female artist could almost double the revenues of Parlux Fragrances Inc. in a few years, chairman and chief executive officer Neil Katz said Wednesday.
The estimate would add at least $150 million to the top line.
The deal, disclosed Wednesday, had a more immediate impact on Parlux’s shares, which shot up 67 cents, or 74.4 percent, to $1.57 on Thursday. Should the agreement with Jay-Z’s Iconic Fragrances go through as planned, the stock will have to rise much more than that for the entertainers to really cash in. Parlux shares have traded as low as 59 cents and as high as $7.15 over the last year.
In addition to royalties and a share of profits, each of the four stars are expected to ultimately get warrants to purchase 3 million shares of the firm’s stock at $5 a piece.
“They have tied themselves not just to the sales that might be done and the royalty paid on those sales, but to the actual profitability of their businesses and how it relates to the share price for all of our shareholders,” Katz said on a conference call with investors.
Fort Lauderdale, Fla.-based Parlux will issue warrants for 2 million shares to both Rihanna and West. If and when shareholders approve expansion of the total number of authorized shares to at least 40 million from 30 million, Parlux would issue warrants for 1 million additional shares to each of the artists.
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There was speculation among some investors on the call that the fourth fragrance would be backed by Jay-Z’s wife, Beyoncé Knowles. Katz said the personality behind the fourth fragrance could be named in the next 30 days.
“I can’t comment on that right now,” he said. “I don’t want to get between husband and wife anyway.”
Jay-Z and the fourth artist will also each get warrants for 3 million shares.
Should Parlux stock rise above $5 and all the warrants are exercised, the company would get a hip-hop cash infusion of $60 million. The entertainers, with a total of 12 million shares, could own 30 percent of the firm’s stock, assuming 40 million shares outstanding.
The ceo also said that Parlux returned to profitability in the fourth quarter ended March 31, but didn’t get into specifics. Sales from continuing operations for the fiscal year ended March 31 were $153.7 million.