Don Morgan’s Brigade Sailaway: An Urban One Stock Shed

Story by RBR.com
Written by Adam Jacobson

In a major move by one of the nation’s key hedge funds with investments in publicly traded radio companies, Brigade Capital Management‘s Cayman Islands-based leveraged capital structures fund has sold off all of its shares in the nation’s foremost media entity superserving African American consumers.

The result? Urban One’s Class A and Class D shares each experienced explosive growth in Monday’s trading on Wall Street.

According to SEC filings made public Monday (6/15), Brigade — led by Donald E. Morgan III — on June 11 disposed of some 3,938,161 Class D shares in Urban One.

Those are the shares traded under the “UONEK” symbol, and not the Class A “UONE” shares which on Monday were exploding in value (see below for more).

The sale price was $0.762 per share, the documents reveal. It’s a $3,000,879 payout for Brigade.

With the transaction, Brigade has liquidated all of its shares held in the parent of Radio One, TVOne, Cleo and the national radio arm Reach Media, in addition to the owner of the MGM National Harbor Resort & Casino outside of Washington, D.C.

Brigade’s stake in Urban One was significant. By comparison, Dimension Fund Advisors LP at the end of 2019 reported beneficial ownership of 2,226,721 Class D shares, representing 5.76% percent of shares in that class.

The sale of Brigade’s shares in Urban One follows two smaller dispositions seen in May. On May 8, some 800 shares were sold at a price of $0.793 per share. Then, on May 11, some 4,260 shares were sold, at a price of $0.809 per share.

At present, Renaissance Technologies LLC is the top shareholder of Urban One’s Class A shares, representing a 5.92% stake in the company. With respect to mutual funds, the biggest holder by far of UONE shares — representing a 42.97% stake in the company — is the Zazove Convertible Securities Fund.

Along with BlackRock and Vanguard Group, these were the main institutional investors in Urban One.

Why did Brigade sell its stake in Urban One? That’s not immediately clear. RBR+TVBR did not immediately hear from CFO Peter Thompson after sending him a request for comment via e-mail.

BEHIND BRIGADE

Brigade Capital Management specializes in credit investment strategies and was founded in 2006 by Morgan. “The firm employs a multi-strategy, multi-asset class investment approach to credit investing, focused on companies with leveraged balance sheets,” it explains on its website.

These companies of late have included Cumulus Media. As RBR+TVBR reported in July 2018, Brigade engaged in a rapid acquisition of Cumulus shares before becoming a full-fledged member of the “Ad-Hoc Cross-Holder Committee” — the group comprised of holders of $2.025 million in term loans and 7.75% senior notes due May 2019 that objected to Cumulus’ restructuring plan.

As of February 2020, Brigade’s stake in Cumulus comprised 1,977,012 shares, representing 12.7% of the company’s stock. It had been the No. 2 holder of shares as of Sept. 29, 2019, with 15.21% of the company’s stock, or 2,366,939 shares.

Then, there is iHeartMedia, the nation’s No. 1 owner of radio stations.

The largest stake in iHeartMedia is held by Brigade Capital, which on June 8 filed a Form SC 13G with the SEC noting it holds 5.01% of Class A iHeart shares.

This gives Brigade shared dispositive power of 3,009,259 shares.

Brigade on September 30, 2019 reported holding $20.5 million worth of IHRT stock.

THE POST-BRIGADE SHARE SURGE

With word of Brigade’s sell-off of Urban One shares, both UONE and UONEK took off like a rocket on the Nasdaq GlobalSelect exchange. As of 2:45pm Eastern, UONEK was at $1.17, up 33% from Friday and at its highest value since March 20.

Volume was impacted by the Brigade sale, with others clamoring for shares.

For the Class A Urban One stock, activity was so brisk that it was nearly impossible to provide a fixed price as of 2:49pm Eastern. That said, shares were up between an incredible 183%-190% from Friday.

At Monday’s Closing Bell, UONE was up 255.4%, to $6.54.

Volume was at an astonishing 24.36 million shares.

And, this was down from a price of $6.66 seen at 11:44pm, with shares taking off just 30 minutes beforehand.

The Closing Bell value is historic, as it has not been since July 2007 that UONE had such a high value (it was previously under a different ticker symbol, as the company was known as Radio One).

As RBR+TVBR went to press, two Wall Street observers took notice of Urban One’s meteoric rise. While indirectly noted, the Black Lives Matter movement could result in economic benefits for Urban One, as advertisers gain motivation to use its media platforms to reach African American consumers.