Imax stock plummets as buyers stay away

Exhib industry woes hurt company, suitors hesitant

Imax, which put itself up for sale a couple of months ago, is caught in a stock market free fall as rumors circulate that the company can’t find a buyer.

Imax, amid optimism that a studio like Disney or Sony would acquire the giant-screen pioneer, hired investment banks Goldman Sachs and Wasserstein Perella to identify purchasers for all or part of the company in July. Wasserstein Perella is a 30% stake holder in the Toronto-based company and wants to cash out, and with help from blue-chip Goldman Sachs it was expected that the search would quickly identify a cozy, new strategic home for Imax.

But since then, the company seems to have been tainted by the financial implosion of the U.S. exhibition industry, which is beset by high debt from a recent building binge. Although Imax doesn’t own the majority of the giant-screen theaters in which its systems are used, its close ties to the ailing exhibition community have triggered some concerns on Wall Street.

The stock’s recent descent dates roughly from a Sept. 7 rating downgrade on the stock to “neutral” from “buy” by Bear Stearns analyst Marina Jacobson.

“The theater operators are an important customer base for Imax, and it’s just not a healthy sector right now,” Jacobson said in a interview Tuesday. “There’s some concern that, with the exhibitors under financial strain, it could reduce future orders for Imax.”

But even Jacobson acknowledged some puzzlement over the extent of the company’s market decline.

“Given its asset base, its brand equity and its strong presence in the digital business, we think the company should be able to fetch at least $30 per share,” Jacobson wrote in a research report accompanying her Sept. 7 rating downgrade on Imax. “(We) believe the company is likely to announce a deal in the second half of the year.”

An initial Wall Street consensus had suggested Imax eventually would fetch somewhere north of $30 a share in a sale of the company. But Imax’s stock price has fallen 38% in recent weeks from a 52-week high of $28.25 to $17.56 by the end of trading Tuesday.

Observed a money manager who requested anonymity: “Their customer base is all going into bankruptcy, so that probably hasn’t helped. But I don’t think there’s a buyer.”

Media congloms including Disney, Sony, Fox and Liberty Media were suggested as potential Imax suitors when the sale search first was launched, with purported interest both in Imax’s core giant-screen projections systems as well as its digital-projection technology. But more recently, there’s been silence from the company and a clamor on Wall Street for some sort of optimistic news.

“I wish I could tell you that I knew what was going on, but I don’t,” allowed one normally plugged-in Street watcher at a major investment firm.

Sounds of silence

“I think there’s been a real absence of information from the company,” complained another investment community source. “They could pre-announce the financial results for the coming quarter. They could quantify their exposure to the exhibition community with respect to receivables and so on. But it seems like they’re in a tricky position right now because of the auction process — they can’t look like they’re trying to influence their stock price.”

A 33-year-old company, Imax has been publicly traded since 1994. Its systems are used in 210 Imax-format theaters worldwide, 10 owned by the company, the balance involving joint ventures and licensing deals with theater operators.

Calls seeking company comment on the sale process and the stock price were not returned.

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