There was a day in May in 2006 when the share price of Cinedigm, then named AccessIT, was $14.59. They were firing on all cylinders; making deals with studios, vendors and cinemas to finance and install digital projectors and servers for thousands of cinema screens, purchasing appropriate technologies to supply an end to end service, and associating with all the right investors.The market cap at its highest was [calculate and edit in – guess: 350 million – current=25 million – add today’s share price (99 cents) and actual market cap.]
Yesterday Cinedigm announced a complex arrangement with the investment group, Sageview Capital. In return for 75 million dollars, given in the form an 8% interest Secured Note, Sageview gets 2 seats on the board and a seven-year warrant to purchase up to 16,000,000 shares of Class A common stock (35% of Cinedigm’s fully diluted shares outstanding.) In a show of faith to their prowess and capabilities, the stock has to increase 38% to 1.37/share from the 99 cents per share value at day’s beginning.
Who are Sageview? Ned Gilhuly and Scott Stuart were B-School buddies who rose quickly through the ranks of KKR during their heyday times, participating in the Nabisco and Regal Cinema deals. Although tipped to succeed the KKR founders, they left in 2006 to specialize in small cap deals, forming Sageview. Guitar Center is the only other entertainment technology investment listed on their website.
At the time of Sageview’s Guitar Center purchases, they made thestatement: Sageview aims to differentiate itself from other investmentfirms, promising neither to be a passive investor like a mutual fundnor an “activist” investor that puts pressure on management of publiccompanies. Messrs. Gilhuly and Stuart seek to take stakes valued atabout $100m in strong companies with stock-market values from $500m to$5bn and hold those stakes for several years.
In further news, another investment specialist, Adam M Mizel, previously on the board, will be joining the working staff of Cinedigm as the unexcitingly titled CFO and the excitingly titledChief Strategy Officer. According to the reporting services, Adam owns 2 million plus shares of Cinedigm stock, though somehow indirectly. (March 19, 2009 Statement of (indirect) Ownership)
There are some who say that business people shouldn’t be involved in running government and finance people shouldn’t run companies – that the philosophies are diametrically opposed – today’s business people are first tasked at looking out for the shareholders bottom line while governments are tasked with looking after the bottom line and Commons of ‘We the People’. Similarly, they say that finance people should focus on meeting the conservative needs of getting funding to the operational units in an efficient manner, while Strategic management should be focused upon turning dreams into fruition, damn the torpedoes.
Cinedigm though, has done all the logical things, but been trapped by the politics of competing studio and exhibitor needs and wants, which in turn has made all their strategy turn into a mere survival game. These latest moves, plus moves earlier this year that pushed off more immediate dept repayments by refinancing their GE dept again, give them a bit of a cleaner field to operate, hoping that the industry will pick up enough to tilt the momentum (defined as size of installed base times products they can sell to the installed base at a better return than movies, allowing the VPF returns to pay off debt.) Perhaps it is appropriate to have a finance person involved in strategy when the strategy has changed from Create to Survive…which is really the theme for the entire industry.
This author will be writing for more concise information to the contact on the bottom of the press releases (1),and (2) Mr. Adam Mizel. Hopefully some more data will also come during webcast’d conference call. Expect edits… Info below:
CONFERENCE CALL NOTIFICATION
Cinedigm will host a conference call to discuss its financial results at9:00 a.m. Eastern on Wednesday, August 12, 2009. The conference can beaccessed by dialing 719.325.4851 at least five minutes before the start ofthe call. No passcode is required. The conference call will also bewebcast simultaneously and will be accessible via the web on Cinedigm’s Website, www.cinedigmcorp.com. A replay of the call will be available after1:30 p.m. Eastern at 719.457.0820 or 888.203.1112, passcode 8479698. Thereplay will be accessible through Wednesday, August 19th.