NEW YORK (Hypebot) –
Shares of digital distributor The Orchard rose 38.9% during the trading day yesterday and then jumped another 70% after hours on news that majority shareholder Dimensional Associates was moving to acquire all additional stock of the company that it did not currently own. Shares which began the day at $1.05 and ended at $1.45 were selling at $2.47 overnight. In a late Friday filing The Orchard had informed the Securities and Exchange Commission that it had received notice from Dimensional proposing that it acquire all outstanding common stock at $1.68 a share.
After discussions with a special committee of Orchard directors, Dimensional upped its offer to $1.84 – a 75.2% premium over The Orchard's Friday closing price.
In a related move, Dimensional's Danny Stein resigned as interim CEO of The Orchard, and the board appointed Brad Navin, the current EVP and General Manager, as interim CEO. Former CEO Greg Scholl left The Orchard last month for an executive position at NBC.
ANALYSIS:
Despite moves like the acquisition of TVT to diversify its position, The Orchard is at its core a digital music distributor – a business model that is facing constant downward price pressure. It's too largest competitors, IODA and INgrooves, have entered into extensive partnerships with Sony and Universal respectively. Though an investment by Sony has been rumored, this leaves The Orchard standing alone trying to compete in an increasingly difficult environment.
The end game for owners Dimensional Associates has always been the sale of both its music properties, The Orchard and eMusic, at a profit. But meltdowns in both the music sector and the greater economy has made that impossible.
Now with the stock near a 52 week low, the savvy investors at Dimensional are gambling that a turnaround is near and that the moves necessary to improve The Orchard's position and ultimately make it ready for sale are best made without the prying eyes of outside stockholders of the SEC.
