<DAILY DOUBLE>
Monday, December 14, 1998
Big Entertainment
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Phone: 561-998-8000
Website: www.bige.com
Price (12/11/98): $11 7/8
HOW DID IT DOUBLE?
Beam me up, Stocky! While Big Entertainment may have its roots embedded deep in science fiction, recent stellar stock gains have been a virtual reality. From the high-tech chain of mall-based Tekno Comix kiosks to the suddenly popular bigE.com online store, the company has evolved to become yet another e-tail highflier.
It all started ambitiously enough. Laurie Silvers and Mitchell Rubenstein created the Sci-Fi Channel and then sold it to USA Networks. They wanted a new venture to tap into their background strengths, so Big Entertainment was hatched. The company began to line up celebrity author talent like Mickey Spillane and Anne McCaffrey to build up an interesting portfolio of intellectual properties. Plus, Big Entertainment teamed with Arthur C. Clarke, the late Star Trek creator Gene Roddenberry, and Isaac Asimov, and it released Leonard Nimoy's Primortals comic book series. While all that may have appealed to sci-fi enthusiasts, it mattered little to the investment community.
Wall Street really only got temporarily excited when the company and Tom Clancy formed a 1995 joint venture. Eventually, however, mounting quarterly losses squashed the fleeting optimism.
Fittingly enough, it was a high-tech move into e-commerce that sent the stock zooming at warp speed. With the November launch of bigE.com, flanked by promotion from the online version of USA Today, the stock became yet another Internet darling.
BUSINESS DESCRIPTION
Big Entertainment signs up popular authors to create specific works for the Florida-based company. They then own exclusive rights to all the media forms of the works, including online books (from its Tekno Books division), along with traditional print books, film, and computer software.
The company also owns Tekno Comix, high-tech kiosks that studio-based goods with a science fiction bent. The kiosks are topped with television sets that carry promotional videos as well as paid advertising clips.
FINANCIAL FACTS
Income Statement
12-month sales: $12.5 million
12-month income: ($6.2 million)
12-month EPS: ($0.84)
Profit Margin: N/A
Market Cap: $87.9 million
Balance Sheet
Cash: $0.2 million
Current Assets: $5.2 million
Current Liabilities: $5.6 million
Long-term Debt: None
Ratios
Price-to-earnings: N/A
Price-to-sales: 7.0
HOW COULD YOU HAVE FOUND THIS DOUBLE?
If science fiction is all about suspending belief and looking ahead to the future, why were these shares trading as low as $2 1/8 back in October? Even after the company announced a deal with Gannett's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GCI)") else Response.Write("(NYSE: GCI)") end if %> USA Today (a move that had sent many other companies soaring in the past after revealing online alliances), the impact on Big was small. The Gannett deal was no surprise because the publishing giant already owned 10% of Big Entertainment.
But company insiders were believers just a few months earlier and at twice the price. Back in July, Big executives, including Rubenstein and Silvers, bought a little over 200,000 shares at $5 apiece. That widespread show of faith from the top may have assured investors even as the stock fell, even before Furby came a-knocking.
WHERE TO FROM HERE?
That's right, Furby. That overgrown Fribble with a face and a gradually growing command of the English language had been a $39.99 in-stock staple at bigE's online store since its Thanksgiving launch.
Hot toy. Hot sector. But what about tomorrow when Furby becomes overstocked clearance bin fodder? Big Entertainment hopes to be ready. The company has announced that it is in negotiations with a major retailer to take over the operations of the Tekno Comix kiosks. That would transform a situation in which the company is currently logging an operating loss into a royalty-collecting franchise with an immediate profit.
Come February, Disney's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DIS)") else Response.Write("(NYSE: DIS)") end if %> ABC Network will air the Clancy-Big collaborated Net Force mini-series during its ratings sweep period. While ABC is clearly more interested in Clancy's marquee value, it will be interesting to see if Big Entertainment's value rises in the eyes of the television networks if Net Force proves to be a prime time winner. While the company has naturally struck solid deals in the book publishing arena, earning new clout in the lucrative film and television fields could really get the ball rolling -- like a Furby down a flight of stairs.
-Rick Aristotle Munarriz
([email protected])