Multiples' $2 billion price on Brahma AI puts Prime Focus's stake at almost half its market value

At the round's price, the 65.67% of Brahma AI held by Prime Focus and its other group companies ^[3] is worth about $1.31 billion ^[1]. Set against the almost $2.8 billion the market puts on Prime Focus ^[2], it comes to 47% ^[2]. That leaves roughly $1.49 billion ^[3] for the rest of the group, including DNEG, the UK visual effects studio behind the Dune films ^[14]. The headline number is at least consistent with itself: $100 million for 5% of the holding company is $2 billion ^[4].

The 65.67% counts holdings by group companies as well as the parent ^[3], and Prime Focus holds its stake through DNEG ^[4]. If any company in that chain has outside owners, Prime Focus shareholders own less than the full $1.31 billion. Multiples also bought preferred shares ^[9]. If those rank ahead of the common stock the group holds, the $2 billion is the price of Multiples' security, and the group's shares are worth something less.

The cheque is cut in two: about $54.36 million into Brahma AI Holdings Ltd and $45.64 million into Brahma AI Services India Ltd, with the Indian shares later swapped for Holdings stock ^[5]. The reports do not include Brahma's revenue, the preferred shares' rights, or the reason for the split.

The round is an issue of new shares ^[9], so the cash stays inside Brahma, which says it will spend it on research, hiring and a push into the United States ^[11]. Prime Focus gets a mark on a unit whose customers include Warner Bros., the NBA and Mayo Clinic ^[15], and some of what is being priced has not launched. "We are close to launching interactive digital humans," Narasimhan said ^[12].

The previous mark was $1.43 billion, set when Brahma bought London-based Metaphysic about a year and a half ago, according to VCCircle ^[7]. In that deal DNEG, itself part of Prime Focus, put in money alongside Abu Dhabi-based United Al Saqer Group, $25 million between them ^[8], while Metaphysic's backers, among them Liberty Global and 8VC, took Brahma shares ^[17]. This time the lead cheque comes from outside the group. The $2 billion post-money is about 40% above the old figure ^[6]. Measured on the $1.85 billion pre-money ^[5], the step-up is about 29% ^[7].

The extra $100 million of demand ^[6] can go three ways. Taken at the same per-share price, it would lift the post-money to $2.1 billion and dilute the group to about 62.5%, with the dollar value of its stake unchanged ^[9]. A higher price would raise Prime Focus's mark. A lower one, or rich preference terms, would mean the $2 billion described Multiples' protected position more than the common. I think the $2 billion is a usable reference for Prime Focus's stake, since an outside firm put $100 million behind it ^[1]. The counter-case is that a Prime Focus holder cannot sell a Brahma share, and the market is under no obligation to pay the private price for one. The view is wrong if the upsize prices below $2 billion post-money.