The Ugly Numbers Behind The Viggle-GetGlue Merger

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When the Viggle-GetGlue merger was first announced this morning, there was initially a bit of congratulations for those involved. After all, there are a number of folks who’d love to see a successful company tackle the social TV market — mainly networks who’d like to see apps that can get their shows more viewers and advertisers who’d like to increase the reach of their messages. Who wouldn’t want to be able to engage with users on the mobile and tablet devices they’re using anyway?

But then people looked closer. And then things started to look ugly. The deal itself isn’t too bad: GetGlue received $25 million in cash and 48,265,731 shares of Viggle common stock. At Friday’s closing price, that comes out to about $53 million in additional stock compensation. GetGlue raised about $24 million, so it’s not a huge win for investors, but it’s also not a total loss.

The press release touted the combined number of registered users — 4.5 million between Viggle and GetGlue. But what really matter are active users, as pointed out on AllThingsD. On that front, the combination doesn’t look nearly as good: Viggle CEO Robert Sillerman told AllThingsD that the two have about 1.5 million altogether. And that’s the problem with today’s Social TV apps: It’s difficult to get either broadcasters or advertisers to care about a couple million users here or there. Maybe that will change if one hits critical mass.

That might be why, as you look through Viggle’s actual financials — and I’ve spent the last several hours going down that rabbit hole — there are so many troubling signs. Let’s start with the merger itself, which is contingent on Viggle raising an additional $60 million in funding. The company says it’s got some strategic partners signed on, but checks haven’t been cashed yet — a source told TechCrunch that Viggle expects the financing to close in the next 30 days.

Look more closely and you see why Viggle needs more financing to get the deal done: After launching in January 2012, Viggle had just $1.7 million in revenues. Over the previous year, it spent $32.6 million in operating activities. It also spent $13.5 million in capex investment, which included $8 million in acquisitions of three companies. And Viggle had just $3.8 million in cash at the end of June, compared with $17.4 million in cash at the end of December.

Viggle said it expects revenue of “at least $10 million” by early 2013. It also expects to become cash flow positive in the second half of 2013. In its annual report, it said it expected capital requirements of $22 million through the next year. That’s all before merging with GetGlue and bringing on its staff.

The good news is that Sillerman believes in the company enough to front it $12 million of his own in a credit facility. Originally announced in June at $10 million, he increased that credit line another $2 million in October, according to a filing from last month. But it’s still disheartening to think about a company burning through cash at such an alarming rate — especially one in a nascent market, which has yet to prove itself.

While it’s too early to tell what will happen when the two combine, the early signs aren’t great. And since GetGlue really was one of the leading apps prior to being spun up, what does that say for its future and the future of the industry in general?