Giant screen op bows India pact as stock inches up
Imax shares managed the first uptick in several trading sessions Thursday after an announcement of a contract for up to 20 theaters in India and some management statements were released suggesting the stock’s decline was unwarranted.
Shares in the Toronto-based company closed up $1, or 6%, at $17.68. Investors had been trading down the stock over dimming prospects of Imax finding a buyer.
The giant-screen pioneer has been hunting suitors to buy part or all of the company. But financial difficulties in the broader exhib community seem to be hampering the process, analysts say.
The stock has lost 19% since Sept. 7, when Bear Stearns analyst Marina Jacobson downgraded her rating on the stock to “neutral” from “buy.” Interestingly, the analyst still wrote in an accompanying investors report that she expected the company to be acquired by year’s end at about $30 a share.
Earlier Thursday, the stock had continued its descent, but execs gave a series of phone interviews to key press and suggested the company was unfairly being tainted by the exhibition community’s woes.
In the India sale agreement, Imax said it will sell a minimum of six projection systems for large-format theaters on the subcontinent to be built by E-Citi Entertainment. The pact carries an option for E-Citi to build up to 20 theaters eventually.
“This agreement represents the strong interest that the company continues to garner in international markets,” co-CEOs Richard Gelfond and Bradley Wechler said. “In spite of the reorganization and consolidation which is taking place with North American commercial exhibitors, Imax’s international expansion remains strong.”
The company also issued a formal statement on its stock, saying Imax “believes the decline in the stock price may have been caused in part by the recent involvement in its stock by several short-sellers in Canada.” (Short-selling is a process in which the investor essentially bets that a share price will decline.)
On Thursday, a Toronto newspaper reported that the Ontario Securities Commission had asked for detailed descriptions of how the company accounts for revenue. The Globe and Mail said the move was part of the commission’s probe into accounting practices at 70 Canuck tech companies.
In its press statement, Imax said the newspaper report may have further fed its stock’s decline but insisted that “the company believes its accounting policies to be in compliance with all applicable Canadian and U.S. regulations.”
Imax further said its search for strategic alternatives for the company continues but it would be inappropriate to give a detailed update of the sale search.