Allen will unload DreamWorks shares

Offering animates DWA

Ending months of nervous speculation on Wall Street, Paul Allen has at last exercised a right to force DreamWorks Animation to sell millions of shares in a so-called secondary offering following the company’s IPO in 2004.

DW Investment, a firm controlled by Allen, said it asked DWA to issue the shares, which belong to him and some other investors, “as soon as is practicable” after the Nov. 3 release of “Flushed Away” — a request that reps a vote of no confidence in the studio’s next toon, which will be released by Paramount.

That’s because, in an odd twist, Allen benefits from selling these particular shares at a low.

The Microsoft co-founder has a $570 million ownership stake in DreamWorks Animation. But he can’t claim it in stock until he sells a portion of it in the secondary offering. If he unloads the minimum required, $220 million, it will leave him with $350 million in shares he can sell anytime at any price.

The lower the price, the more shares Allen gets allocated. For his $350 million, he’d receive 15.2 million shares if they’re trading at $24 — but only 11.6 million shares if they’re trading at, say, $30. So if he thinks the stock is going higher, he wants as many shares allocated to him as possible.

DWA declined to state when it will issue the secondary offering.

“The company and the board have received Paul’s request and will determine the appropriate timing for the offering,” DreamWorks Animation prexy Lew Coleman said in a statement. 

The news — which means something like 13 million-14 million DWA shares will be for sale on the open market — pushed the stock price down 1.86% Wednesday to $23.75. The offering will represent a hefty portion of DreamWorks Animation’s 103 million shares or so outstanding.

But some Wall Streeters are immensely relieved to have clarity on the secondary. The prospect of it has been looming over the stock, and investors hadn’t been able to pin the company down on when it might be.

The sale also dissolves a temporary company called HoldCo, which housed the stakes of Allen and others — including co-founders Stephen Spielberg, David Geffen and Jeffrey Katzenberg — in a complex agreement related to the IPO.

That will give DreamWorks “a cleaner and more transparent corporate structure,” Bank of America analyst Michael Savner said.

“It also aligns the interest of DreamWorks’ largest shareholder with public shareholders,” he added.

“We believe that the resolution of Hold Co. will be a positive for the company and its shareholders,” Coleman said of the move.

Allen will remain the company’s biggest stakeholder even after the secondary offering.

(Ben Fritz in Hollywood contributed to this report.)

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