Two months before filing its 2020 annual report, Comscore (SCOR), a multi-platform ratings and advertising measurement service, issued more than $204 million in convertible preferred stock to three buyers, including Charter Communications. The issuance is being used to repay Starboard Value, which had provided Comscore with financing, due January 2022, while agitating for a sale of the company, which has not happened as of this writing.

In it’s 2020 10-K, Comscore disclosed the price it paid to rid itself of Starboard. In addition to what Comscore calls a non-cash charge between $15-$25 million based on where its stock has recently traded, the company also disclosed that holders of the convertible preferreds are entitled to an annual cash dividend of 7.5% plus:

“In addition, holders of our Convertible Preferred Stock will have certain dividend rights following the Transactions, including the right to request a special cash dividend after January 1, 2022.”

With terms as such, it’s not surprising Comscore did not quantify the liability associated with the special dividend in its annual report. To learn more investors would need to dig through Comscore’s credit agreement with Charter and the other parties, which states:

“...the Company will take all actions reasonably necessary to pay a one-time dividend on the Preferred Stock (the “Special Dividend”) equal to the highest dividend that the Board determines can be paid at that time…”

If the special dividend Comscore’s board can afford is less than $50 million, holders of the convertible preferreds have the right to turn down the special dividend and make another request later when Comscore may be better positioned to pay more. The credit agreement also seems to create an incentive for holders of the convertible preferreds to request a dividend in excess of $100 million:

“Notwithstanding the foregoing, if $100,000,000 of Special Dividends and Annual Dividends...have been paid on the Preferred Stock, the Company will use any remaining amount of the Special Dividend requested by the Stockholder to pay a pro rata dividend (the “Pro Rata Dividend”) on the Common Stock (with the Preferred Stock participating on an as-converted basis…”

It may be the best deal Comscore can get 18-months after settling accounting fraud charges brought by the SEC. Issuing the convertible preferreds, according to Comscore’s estimate, provides enough liquidity for one year. However, nine months after the issuance is when holders of the convertible preferreds can make their first request for a special dividend. Comscore’s favorable liquidity position may be short lived.