NEW YORK – Rising hopes for “Evita” prompted a rally in Cinergi Pictures Entertainment Inc. stock Monday, lifting the stock 15% to close at $1.96 after reaching a high during the day of $2.03.
But the rally wasn’t as great as expected, given the usual pattern of investors to buy heavily before a big picture’s opening. “I would have expected the stock to move sooner, and had told clients to expect a run-up between the beginning of November and the Dec. 25 opening,” said Dennis McAlpine, an analyst with Josephthal Lyon & Ross.
Instead, Cinergi stock drifted down from around $2 at the start of the month to $1.68 last Thursday, the day “Evita” picked up five Golden Globe nominations. News of the nominations helped buoy hopes for the pic, the last big-budget project made by Cinergi before it began a review of its business strategy and started looking for a buyer last Spring. Cinergi has drastically scaled back its production efforts since the business review began, although it recently began production on “An Alan Smithee Film” and has “Broadway Brawler” in pre-production.
Cinergi’s attempts to find a buyer have so far come to nothing, with talks being held unsuccessfully with Arnon Milchan’s New Regency Enterprises and Mike Medavoy’s Phoenix Pictures. As a result, Wall Streeters say success with “Evita” would help lift Cinergi’s fortunes.
“This picture has to be big,” said one investment banker.
People close to Cinergi play down the picture’s longer-term impact. One noted that, while a hit could only help, it wouldn’t change the reality of rising production and marketing costs which prompted the review of Cinergi’s business strategy in the first place.
Emphasis on earnings
McAlpine agrees, saying longer term “it won’t make that much of a difference.” He says the main impact will be on earnings. “They need some hits, and they don’t have anything else until ‘Shadow Conspiracy,’ ” which is to be released in January.
He speculated that the stock market rally hadn’t been as strong as usual because of uncertainty created by the long-running efforts to find a buyer for the company.
If investors follow their usual pattern, the rally will end today. Those investors who speculate on movie openings usually buy well ahead of the opening of a picture and sell into the rally immediately before an opening, which leaves today’s trading as the last session for the selling.
Cinergi’s office was closed Monday and execs could not be reached for comment.