As we sent out via Activist Strategy, the other night we detailed some thoughts on Sabra Capital's Cinedigm position. First, as reported earlier this week, Sabra Capital is active on Cinedigm, owning 2.7% of the stock and 10% of its notes. Sabra has been a shareholder since 2013 and it’s the fund’s largest position.
Sabra has put together a SOTP valuation that pegs Cinedigm’s value at $96mm, which is a far cry from the $543mm SOTP valuation it had on the company back in September (more on that Sep. thesis later).
Cinedigm diluted investors with a $64mm convertible offering in April 2015 -- shares have tanked 33% since that offering. Sabra wants board representation to ensure judicious spending of the new capital. In particular, Sabra wants a share repurchase program of $15mm to offset the convertible dilution. We could also separate its two businesses, creating a pure-play content distribution player with a clean balance sheet and high growth prospects -- with that comes the higher multiples argument.
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