Feds shred ‘Shrek’ probe

SEC may end D'Works investigation

DreamWorks Animation is one step closer to putting last year’s “Shrek 2” DVD debacle behind it.

The Securities and Exchange Commission’s L.A. office recommended on Thursday that an investigation into Jeffrey Katzenberg’s toon studio be terminated with no enforcement action.

While the SEC itself still has to make a formal decision, recommendation makes it very likely that DWA will escape government sanction for failing to warn investors, before first-quarter earnings were announced last year, that returns on the “Shrek 2” DVD were running much higher than anticipated, causing the company to miss guidance.

DreamWorks Animation is still facing shareholder lawsuits over the incident, however.

News comes after the studio reported better-than-expected earnings earlier this week, based primarily on strong sales of the “Madagascar” DVD. Its stock, which closed up 2% at $27.80 Thursday, is close to exceeding 2004’s $28 IPO price for the first time since February.

Stock didn’t move in after-hours trading following the SEC news, however. Investors are likely much more interested in the upcoming opening of “Over the Hedge,” which will be the biggest driver of DreamWorks Animation’s performance this year.

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