After 16 years as chief financial officer of Omnicom, Randy Weisenburger left the agency services holding company last September to start his hedge fund, Mile 26. But he hasn't completely ditched the ad business. Mr. Weisenburger recently spent more than $5 million on shares of MDC Partners, amid news in April that the SEC had been investigating MDC's accounting practices, trading and former CEO Miles Nadal's expenses.
Mr. Weisenburger pounced shortly after news of the investigation broke. That news initially sent MDC stock from $28 to a low of $18. He made another investment for an undisclosed amount this month, after the company announced that Mr. Nadal, along with MDC's former Chief Accounting Officer would step down and each repay the company in varying sums amid the investigation.
"I don't think any issues raised by the SEC have anything to do with the operating company itself," said Mr. Weisenburger. "Underlying agencies are what's fundamentally driving the business. None of the SEC inquiries have to do with the way the company operates, its clients or its underlying businesses. Many seem to be performing well in the marketplace. On that basis, I made the investment. I just felt the market probably overreacted."
On the SEC's investigation into goodwill accounting, Mr. Weisenburger said, "It's not an operating issue, and it's a non-cash issue."
"I do see the potential that the stock gets back into the mid- to high 20s in the next year or two, and hopefully faster, but I'm a long-term investor," he added.
MDC declined to comment. The company's share price on Tuesday closed at $17.25.
Mile 26, which now has six full-time employees, will soon focus on raising third-party funds. Currently, Mr. Weisenburger is funding investments using his own money. He has also made an investment in ad-tech giant TubeMogul.
The hedge fund is looking at investment categories including media and telecommunications, business services and so-called special situations. MDC falls into both the business services and special situations categories, Mr. Weisenburger said. "It happens to be in the sweet spot of ad and marketing services, which we probably knew a little more about, and allows us to react more quickly than we would have been able to react [otherwise]."