Hedge Fund Presses IDW Media to Sell Itself or Risk Struggling

ADW Capital says the media company should hire an investment bank to help it find a strategic partner.

Illustration by II

Illustration by II

Hedge fund firm ADW Capital Partners is pushing IDW Media Holdings to sell itself about two months after the media business warned it would need to raise capital from shareholders.

ADW, which owns more than 9 percent of IDW, said Tuesday in a letter to the company that a sale would help maximize the value of its intellectual property. The hedge fund said the market is discounting the value of IDW because of its lack of scale and resources or its unwillingness to sell to a strategic partner.

The company, which publishes comic books and distributes television shows, announced December 21 that it had obtained financing from its chairman Howard Jonas but still needed an investment to cover production costs. IDW said it was planning to raise money from existing stockholders through a private placement.

“I am asking management to do the right thing for all stakeholders today and publicly announce a strategic alternatives process and its engagement of a major investment bank,” Adam Wyden, the founder of New York-based hedge fund firm ADW, said in the letter. “By seeking a strategic partner at this stage in the game, it should ensure that the company can grow significantly.”

Wyden cited the challenges of remaining competitive as a small, independent company that is publicly traded. IDW may struggle due to high capital costs and insufficient staffing and operational resources, according to his letter.

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Large studios and distributors with bigger balance sheets and monthly subscription fees are in a better position to cover production financing and “fringe costs,” he said. Still, IDW’s lack of resources doesn’t mean its content is any less valuable, Wyden said, estimating the company is worth at least twice as much as current trading levels.

“Bill Gates and Sumner Redstone are famous for a number of things but few know that they are credited with the statement, ‘Content is King,’ he wrote in his letter. “We believe those words have been never truer than today. Disney’s decision to pull its content from Netflix was akin to Princip’s shot of Archduke Franz Ferdinand that thrust the globe into its first world war.”

Wyden valued IDW at $329 million to $599 million, or $53.93 to $98.20 a share, based on a sum-of-its-parts analysis. The Stamford, Connecticut-based company’s shares closed March 4 at $27.50 and were trading down about 5 percent Tuesday afternoon.

In December, IDW said it had needed a cash infusion in part to cover production costs for Netflix Original series “October Faction” and “Wynonna Earp.” According to Wyden’s letter, “Wynonna Earp” recently won a People’s Choice Award and was renewed for additional seasons by SyFY, an NBCUniversal-owned cable channel focused on science fiction.

IDW’s “creative talent, ingenuity of management, and library of content would be invaluable to many large-scale players who are starved for new funnels of content on their growing distribution platforms,” Wyden said in his letter.

A spokesperson and investor relations representative for IDW did not immediately reply to emails seeking comment on ADW’s letter to the company.