Posted by Moncrief The Manhunter at proxy5.anonymizer.com on October 12, 2000 at 17:21:52:
What do you think about this Kevin? I bought a thousand shares of marvel stock a few years ago before the heroes reborn thing and now I do not know if I can get my money back. read on.
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ANALYST SAYS MARVEL CASH RUNS OUT BY END OF 2000!
October 11: The financial position of struggling MARVEL ENTERPRISES may be worse off than previously reported. A new analysis of the company and the recent collapse of its stock price at individualinvestor.com, warns that MARVEL is in danger of running out of operating capital before the end of the year. To make matters worse, news broke yesterday that MARVEL's largest institutional investor, MORGAN STANLEY DEAN WITTER, the brokerage firm that succesfully floated the $250 million in junk bonds that MARVEL ENTERPRISES is built on, is facing serious problems as well.
IndividualInvestor.com said today that: "Shares of Marvel have not fared too well since our last update, losing about 40% of their value in the last five weeks. The drop is likely due to a six-month delay in the release of the company's next major movie production, a live-action version of Spiderman. That means the schedule for receiving licensing revenue on the movie's merchandise has also been moved forward. Investors had hoped that initial Spider-Man-related sales would come as early as the current quarter. Management also reiterated that it sees a deteriorating landscape in the toy industry, which may be reflected in its Toy Biz division."
IndiviualInvestor.com said: "At this point we would be remiss to ignore Marvel's financial situation, given the fact that the company is sitting on $250 million in debt and has lost $49 million over the last four quarters. With management's recent guidance to investors for possibly lower revenue and EBITDA (year-over-year), Marvel's losses over the next two quarters will be at least $15-20 million. At the end of the June quarter, Marvel had about $46 million ($1.37 per share) of cash on hand. In addition to the $15 million semi-annual interest payment due in December, the company also has preferred stock dividend obligations of about $4 million in the second half of the year. These calculations mean that the company is in danger of running out of cash some time before the end of the year. While Marvel does have a $60 million available line of short-term credit, we believe that the company may opt for the sale of debt and/or equity securities. The cash situation will undoubtedly come up during the third quarter conference call, currently scheduled for a month from now."
The picture may actually be bleaker than that painted by IndividualInvestor.com. A poster to the MARVEL Yahoo! Message Boards pointed out that according to MVL's recent 10Q filing, the Citibank Credit Facility (which IndividualInvestor.com refered to as a "$60 million available line of short-term credit") was reduced in April 2000 to $40 million.
Perhaps even more troubling is the recent news concerning MORGAN STANLEY DEAN WITTER who own an 11% stake in MARVEL and would be involved in any further sale of securities or junk bonds to refinance the company. According to the THE NEW YORK POST, MORGAN STANLEY "tumbled another $8.25 yesterday to close at $74.50 - its third significant stock market decline in three trading days. The brokerage company closed at $92 on Thursday, meaning it has lost more than 17 percent of its value in a few days time - not unheard of for a tech stock, but rare for a white-shoe investment bank. Persistent rumors of high-yield losses have dogged the company since Dwight Sipprelle, the company's head of high yield, resigned last week. Ken deRegt, the company's global head of fixed income, also resigned recently in a management reshuffle. Morgan Stanley has never denied the rumors, but says they are "greatly exaggerated." Some industry sources place the losses as high as $500 million. Morgan Stanley has issued bonds for Viatel, Call-Net Enterprises and ICG Communications - all of which have declined significantly - leaving the underwriter with positions that are said to be troubling it greatly. A rival suggested Morgan Stanley could also be holding problematic positions in Owens Corning bonds, Amazon.com convertibles, Amazon.com high-yields, as well as a loan to Nortel Inversora in Argentina." On Tuesday a Morgan Stanley spokesman said the company's losses were in the $90 million range.
MORGAN STANLEY's problems signal a softening of the junk bond market, which could create difficulties in any refinancing of MARVEL's existing debt or attempts to float new paper. MORGAN STANLEY currently holds 2.2 million shares of MARVEL and has seen their worth plummet from almost $16 million to $6.5 million in three months time. Were MORGAN STANLEY to unload its large position, it would drive the price down even further.
With its market cap shrinking rapidly along with its stock price, Marvel might be a tempting target for a hostile takeover. A month ago, the Board of Directors went so far as to erect a controversial "shareholders rights" takeover defense designed to keep them in control of such a situation. Ironically its greatest defense right now is its debt, which at $250 million, is seen as high for the company.
The doomsday scenario comes at a critical time for MARVEL's publishing arm. Unconfirmed rumors that the company was close to a deal that would have licensed its comics division out to another large publisher buzzed around the industry all summer. But the recent addition of a fresh editorial team taking charge, and the announcements concerning new MARVEL newstand magazines aimed at younger readers, signals a renewed commitment to its publishing division. The question is, can the parent company hold together financially long enough to realize these new visions for comics?
More importantly, based on the old adage that "As Marvel goes, so goes the industry", can the current Direct Sales Market, already battered and bloodied by years of decline, survive yet another Marvel meltdown?