The Hunger Games: Catching Fire Sets November Records
Lions Gate’s (LGF) shares are under pressure this morning as the market’s expectations of The Hunger Games: Catching Fire, the second installment of the Hunger Games franchise, were just a bit too high, despite the film grossing approximately $160 million in North America over the weekend, setting a November record. Globally, the sequel catapulted to a $307.7 million opening, exceeding the original film’s $211.8 million debut in March 2012. The second Hunger Games movie grossed approximately $18 million in IMAX (IMAX) theaters worldwide and $12.6 million in 347 IMAX theaters in North America since the November 22 release. IMAX noted that this was the best three-day domestic opening for November in IMAX’s history. We expect the sequel to top out at the box office at over $1 billion when all is said and done, up significantly from the original’s $691 million. The success of the first two movies and Jennifer Lawrence’s ever-growing popularity as Katniss Everdeen, the main character in the movie, are setting up the third big-screen installment of Suzanne Collins’ book trilogy very nicely. But despite the record-breaking performance of the Hunger Games franchise, the market had been expecting a bit more. Shares of Lions Gate are down more than 8% at the time of this writing, while IMAX’s shares are about flat.
Theater Operators: CKEC, CNK, MCS, RDI, RGC
Giant Interactive Chairman To Take Company Private
Shares of Giant Interactive (GA), a leading online game developer and operator in China, are getting a bid today on news of a non-binding proposal from the company’s chairman to acquire the company at $11.75 per share. The consortium members already own 47.2% of the firm, and we would consider the probability of the deal going through as highly likely. The price represented a 16% premium to Friday’s close but was almost spot-on with our $11 per share fair value estimate of the company. Shares are up significantly since we highlighted them as trading at a material discount to our point estimate fair value. We note the proposal is only a preliminary indication (not definitive), and the board’s decision to release the letter was probably based on gauging the market’s opinion. We don’t plan to be active in the firm’s shares, and based on trading action (shares are still trading at a discount to the offer price), a higher offer doesn’t appear to be immediately in the cards.
FAB Universal Trying To Stay Afloat
FAB Universal (FU), a worldwide distributor of digital media and entertainment, has come under significant pressure as it seeks to respond to allegations of potential wrongdoing. The allegations are widespread and range from failing to properly disclose securities issuances to pirating copyrighted content to misrepresenting the size of its firm. Many individual investors found themselves holding this firm as a result of a very well-known, non-profit organization’s ‘transaction alert’ to ‘buy’ it on September 3, 2013. You can see the individual investors piling in at that time; it saddens us immensely to bring up this chart, but it is a story that must be told, so others may not fall into a similar trap.
FAB Universal is an example that highlights the severe risk of investing in micro-cap firms (stocks with market capitalizations under $250 million), where transparency may be lacking and coverage is minimal. Stocks that are so thinly-traded often aren’t followed by many professional investors, and very important independent (unbiased) opinions may be limited. Many individual investors feel that an underfollowed company presents opportunity, but in many cases, the risks far outweigh the rewards. Shares of the firm were halted (pending news) at the time of this writing. We have no intention or interest in picking up analyst coverage of FAB Universal.