Heroes Wanted: Stan Lee Media Struggles to Stay Afloat
Less than two years ago, Stan
Lee Media rose from the ashes of a bankrupt Marvel, where comic
legend Stan
Lee created characters such as Spider-Man, the Incredible Hulk
and the X-Men.
With the creative force of Lee
providing guidance, Stan Lee Media quickly earned widespread praise
for its innovation in online animation. The company developed a loyal
audience for its new characters and attracted high-profile clients
like the Backstreet Boys for its animation services. With the wind
of a dot-com boom at its back, the company even found itself able
to hire away talent from major studios like Disney, attracting animators
looking for the creative freedom and energetic environment associated
with an Internet start-up. Soon after the launch of its stanlee.net
Website in February 2000, Stan Lee Media's market capitalization was
well over $300 million, about $100 million more than Marvel Enterprises,
where Stan Lee still serves as chairman emeritus.
Like many Internet-related companies, however, Stan Lee Media's perceived
success did not accurately reflect conditions behind the scenes. Although
the company's stock managed to remain comparatively stable through
much of the dot-com stock bubble burst in 2000, Stan Lee Media was
running out of money at a blistering pace. While taking in just over
$1 million in revenue in its short history, the company tore through
over $20 million in cash.
In Stan Lee's comics, when trouble strikes you can always depend
on Spider-Man or another familiar hero to save the day. Unfortunately,
it's not that easy for his namesake company, which must depend on
a different sort of superhero, the high-risk investor.
Putting The Players In Place
In November, it seemed as if Stan Lee Media had found its champion.
A bridge financing deal was reached to provide enough backing for
the company to continue operating. Along with the deal came a qualification,
however. If the company's stock price dropped below a dollar, the
financing agreement would not move forward.
The events of the following weeks defy explanation. In the face of
the positive financing news, Stan Lee Media's stock price plummeted
down from about $8, smashing through the $1 mark on unusually high
trading volume, as short-sellers apparently found reward in the carnage.
On December 15, with its stockholders still reeling, Stan Lee Media
announced that the plunge scuttled the company's badly needed financing,
forcing it to suspend operations and lay off nearly all of its 140
employees.
In a press release, Ken Williams, President and CEO of Stan Lee Media,
expressed a glimmer of hope in saying, "We still believe in the
fundamentals of our business plan and are proud of the work we have
accomplished to date... In the coming weeks we will be focusing on
exploring the full range of strategic alternatives available to us
in order to maximize shareholder value."
Since learning of the company's shutdown, angry stockholders have
directed their ire toward Stan Lee Media insiders. A prime target
is Peter F. Paul, a long-time friend of Stan Lee and co-founder of
Stan Lee Media who had served as a consultant to the company since
its inception. According to Securities and Exchange Commission filings,
Paul reported his intention to sell through PFP Family Holdings, his
family trust company, over 400,000 shares of Stan Lee Media stock
in its final 20 days of trading. A sale of that size in the midst
of Stan Lee Media's meltdown would yield estimated proceeds of over
$635,000 for PFP, with those sales representing almost 8% of the stock's
trading volume over that period.
Since learning of the company's shutdown, angry stockholders have
directed their ire toward Stan Lee Media insiders. A prime target
is Peter F. Paul, a long-time friend of Stan Lee and co-founder of
Stan Lee Media who had served as a consultant to the company since
its inception. According to Securities and Exchange Commission filings,
Paul reported his intention to sell through PFP Family Holdings, his
family trust company, over 400,000 shares of Stan Lee Media stock
in its final 20 days of trading. A sale of that size in the midst
of Stan Lee Media's meltdown would yield estimated proceeds of over
$635,000 for PFP, with those sales representing almost 8% of the stock's
trading volume over that period.
When Stan Lee Media's stock price made its final plunge to 13 cents
on December 18, NASDAQ halted trading of the company's shares. Shortly
after, the Securities and Exchange Commission opened an informal inquiry
into the trading of the company's stock "by certain individuals
and entities."
Seven Stan Lee Media insiders, including Devendra Mishra, president
of the company's international unit, filed to sell approximately $2.1
million worth of stock in the company's final 20 days of trading.
As of press time, with trading in the company's stock still halted,
Stan Lee Media's total remaining value in terms of market capitalization
is only about $1.69 million.
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