No amount of special effects wizardry could make Digital Domain Media Group Inc.’s Nov. 18 initial public offering look good to investors. The company fell short of its targeted price range and cut the number of shares issued.
What’s more, shares fell 16 percent on the first day of trading and since then dropped another 9 percent to close at $6.49 on Nov. 23.
The Port St. Lucie, Fla., company, which owns Venice visual effects house Digital Domain, raised just $42 million, selling 4.9 million shares priced at $8.50. The company had planned to raise up to $60 million by offering 5.5 million shares priced up to $12, according to a prospectus filed earlier this month.
David Menlow, who runs website IPOFinancial.com, said the lackluster debut is likely sticking with investors.
“Having the price cut, but not cut deep enough, having the shares cut, then having the stock open and trade significantly lower that day, it’s a stigma that hangs over any company,” he said.
Digital Domain, co-founded by “Titanic” and “Avatar” director James Cameron in 1993, is the effects company behind the “Transformers” franchise and numerous other blockbusters, including recent hit “Real Steel.” It plans to use the IPO proceeds to co-produce its own films.
The company wasn’t the only initial public issue to struggle during the week of Nov. 14, which saw the major indices lose ground amid continuing economic and debt woes. Five of seven IPOs that debuted closed down on the first day of trading.
Still, Menlow said the weak debut was more attributable to Digital Domain’s recurring losses, the deal’s small underwriter and the stock’s late opening Friday afternoon, after many potential investors had taken off for the weekend.
For the six months ended June 30, the company reported losses of $122 million. Roth Capital Partners, a regional investment bank based in Newport Beach underwrote the offering.
“Everything that happened with the offering was the wrong step,” he said. “There weren’t a lot of things that were causing investors to say, ‘This is what I want to be part of for long-term capital gains.’”
Still, insiders are sticking by the company. Chief Executive John Textor purchased $10 million worth of stock at $8.50 a share the day of the IPO, according to a Nov. 22 regulatory filing.
Driving Ads
You want some information with those ads?
JD Power & Associates in Westlake Village and EC Hispanic Media in Norwalk hope so.
JD Power, a leading market research consultancy, recently licensed its consumer reports to be used as inserts in EC Media’s Spanish-language classifieds newspaper El Clasificado. The consumer reports will cover products from the automotive, insurance and banking industries. El Clasificado will supplement the consumer reports with editorial content.
For example, an insert for the best new cars could be accompanied by editorial copy detailing the cars driven by the highest-paid soccer pros, said Hugo Hernandez, vice president of marketing at EC Hispanic Media. The paper also will sell advertisements inside the inserts.
The deal is part of JD Power’s effort to increase its presence with Spanish-speaking audiences. Earlier this year, the company opened its first office in Mexico. El Clasificado has a circulation of 6 million and is distributed on racks outside of retailers such as Wal-Mart.
“This is a good opportunity to raise brand awareness,” said Peter Marlow, vice president of communications at JD Power, who first approached EC Hispanic Media for the partnership.
Mixed Messages
You know those spots before movies telling patrons to turn off or silence cell phones?
Some of them are sponsored by West L.A. ticketing company Fandango. But the company is glad enough to let you use your cell phone to buy tickets before the movie starts.
The company announced that 22 percent of tickets purchased through Fandango to the opening weekend of “Twilight Saga: Breaking Dawn, Part 1” were paid for with mobile devices – the highest percentage of mobile sales it has seen yet.
About 40 percent of Fandango.com’s traffic comes from mobile users, but many are just browsing for show times and will purchase tickets through a box office or other sites.
Still, the company, owned by Philadelphia’s Comcast Corp., has had success getting browsers to press “buy” on mobile devices this year. Fandango executives said the company has sold 73 percent more tickets on mobile devices than last year.
“We’ve seen a large volume of mobile ticket sales from all kinds of audiences this year, from action fans heading to ‘Fast Five’ to families anxious to see ‘The Muppets,’” said Jessica Yi, chief product officer at Fandango, in an e-mail.
Staff reporter Jonathan Polakoff can be reached at [email protected] or (323)549-5225, ext. 226
