If television production company Kew Media Group Inc. were to make a TV show out of what’s played out in its head office over the past three months, it would be classified as horror.
Toronto-based Kew was founded in 2015 by a pair of experienced entertainment executives, chairman Peter Sussman, a producer on the CSI crime series during his days as an executive at Alliance Atlantis Communications Inc., and chief executive officer Steven Silver. Their niche is creating and distributing programs that range from cooking shows to prison documentaries for conventional TV networks and streaming services.
But of late the company has faced a string of negative developments, the latest of which came on Wednesday when auditor Grant Thornton LLP withdrew Kew’s financial statements for the past three years after determining it could not rely on information it received from the company’s former chief financial officer, Geoff Webb.
On Wednesday, Kew also said it expected to miss regulatory deadlines for filing 2019 financial results because of an investigation of Mr. Webb’s actions and Grant Thornton’s decision to withdraw its statements. Spokespersons for Kew and Grant Thornton declined further comment.
The auditor’s move came after Kew disclosed in mid-December that Mr. Webb, who joined the company in 2017, had left. Kew said certain reports that Mr. Webb provided to its lenders and auditors contained inaccurate financial information, including its working capital.
At the time, Kew also said its board had formed a special committee to review the company’s strategic alternatives, including a potential sale. The board said it took this step after fielding “expressions of interest from a number of parties concerning potential transactions involving the company.”
Kew’s banks, led by Atlanta-based SunTrust Robinson Humphrey Inc., Toronto-Dominion Bank and Bank of Montreal, subsequently said in December that the company is in default on its loans, “due to the inaccurate information provided to them" by Mr. Webb. Kew owed lenders $139-million when it last reported financial results, for the period that ended Sept. 30, 2019.
In November, Kew reported a $6.4-million quarterly loss after a client – the Discovery Channel – dropped a number of Kew television shows. At the time, executives played down the setback. Mr. Sussman said in a press release: “There’s never been a better time to be in our business.”
However, Kew’s stock price dropped from about $6 in November to penny stock levels, closing Thursday down 7 per cent at 64 cents on the Toronto Stock Exchange, valuing the firm’s equity at $9-million.
Kew produces approximately 2,000 hours of programming annually, including cooking show Fire Masters for Corus Entertainment Inc. in Canada. Death Row Stories for CNN, an arm of AT&T Inc., and Dirty Money for Netflix Inc. are among its U.S. programs.
Kew went public in Canada in 2017 when the business was purchased by a special purpose acquisition corporation, or SPAC, that raised $70-million the previous year by selling shares for $10 each in a transaction led by TD Securities Inc. At the time, SPACs were popular offerings in Canadian capital markets, with six of the vehicles going public and raising more than $1-billion for takeovers.
Kew is the latest SPAC to stumble since going public. The largest SPAC, Acasta Enterprises Inc., raised $418-million in 2015 by selling shares at $10 each, and now trades 48 cents, after failed acquisitions of an aircraft leasing firm, a soap maker and a beauty products business. Ironically, some of best-performing SPACs were a handful of vehicles that failed to acquire a business, and handed back 100 per cent of the money invested by public-market backers.
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