Cinedigm is a small, and thinly traded, company — so its stock price often swings like a yo-yo. But not like this morning: Its shares plummeted more than 25%, and touched a new low of 92 cents, after the content company disclosed a complicated and private $60 million borrowing transaction that it says could affect its stock value.
The company will use some of the cash to build its collection of streaming video channels. More than $18 million will refinance debt. Cinedigm also will repurchase some of its shares.
But there’s a lot of murkiness in the release describing the notes, which won’t be registered or sold in the U.S. Debt holders will be able to convert their loans to stock.
The terms also include a “privately negotiated forward stock purchase transaction” with an unnamed financial institution. It’s designed to help the buyer make “privately negotiated derivative transactions” with the lenders. That could lead the lenders to “establish short positions” on Cinedigm stock and “otherwise hedge their investments.”