In a new filing with the Securities and Exchange Commission, AOF Management, founded by Joe Pretlow and Ben Terk, disclosed its ownership of 3.90 million shares of Cinedigm Corp (NASDAQ:CIDM), which represent 5.2% of the company’s outstanding common stock. The stake is activist by nature and AOF Management considers that Cinedigm is undervalued and it might engage in discussions with other parties regarding value-enhancing opportunities at Cinedigm.
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AOF Management is a deep value, event-driven, long-short hedge fund firm founded by Joe Pretlow and Ben Terk in November 2009. Joe Pretlow, one of the founders and portfolio managers at AOF, has invested in small-caps for 20 years and managed the private equity investment firm JPC. Meanwhile, Ben Terk served as a partner manager at Rho Capital for 10 years and led several minority investments and played an active role on several boards. Hence, Cinedigm might achieve a rewarding turnaround in the upcoming months, thanks to the expertise in the industry of AOF Management’s managers. The investment management firm launched its Active Owners Fund (AOF) in January 2011 that is entirely focused on finding small-cap investing opportunities. The fund reported a return of -4.9% in its first year of existence, 24% in 2012 and 28.5% in 2013, which indicates that Joe Pretlow and Ben Terk are very successful in managing their capital and investments.
Cinedigm Corp (NASDAQ:CIDM) is a leading independent content distributor in the United States, which has developed direct relationships with numerous physical retail storefronts and digital platforms. Its stock has dropped by nearly 55% year-to-date. Nevertheless, the company issued $64 million in notes back in April. It will use some of the capital to develop its portfolio of streaming video channels. More than $18 million of cash will be used to refinance the company’s debt, while some of the remaining cash will be used for its share repurchasing program. The company has also recently announced a $5 stock buyback program. It has also been rumored that the current CEO and Chairman of Cinedigm, Chris McGurk, is actively looking for a new chairman for the company, which might result in a fresh start for the company.
In the meantime, Cinedigm has hired Evolution Media Capital a few weeks ago to evaluate potential takeover deals. The independent film and television distributor has attracted some interest from other entertainment companies that seek to expand their digital strategies. This might also represent a great outcome for the current shareholders of Cinedigm. However, activist shareholder Ronal Chez, who is among the largest investors in Cinedigm Corp (NASDAQ:CIDM) through his Chicago-based investment firm, has claimed that the company is a great opportunity and it simply needs the right leadership. Therefore, it seems that Cinedigm might actually achieve high growth rates in the future through organic growth rather than securing potential merger deals.
The disappointing earnings report for the fourth fiscal quarter also signaled that Cinedigm Corp (NASDAQ:CIDM) needs a quick radical change. On June 29, Cinedigm reported a net loss of $11.03 million for its fourth fiscal quarter of 2015, compared to the loss of $3.33 million posted for the same quarter a year ago. Put it differently, the company had a loss of $0.14 per share, while the loss adjusted for asset impairment costs and accounted for discontinued operations amounted to $0.09 per share. At the same time, Cinedigm reported fourth quarter consolidated revenues of $27.6 million, compared to $31.66 million reported in the fourth fiscal quarter of 2014. For the full fiscal year, the television distributor posted a loss of $31.3 million or $0.41 per share, on revenue of $105.5 million, compared to a loss of $25.86 million and revenue of $104.33 million a year earlier.
Within our database, John M. Angelo and Michael L. Gordon’s Angelo Gordon & Co and Jim Simons’ Renaissance Technologies represent the largest shareholders of Cinedigm Corp. (NASDAQ:CIDM) with 1.38 million shares and 657,813 million shares, respectively.
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