Genius Brands International Responds to Misleading Short Seller Criticisms
June 08 2020 - 9:00AM
Business Wire
Genius Brands International, Inc. “Genius Brands” (NASDAQ:GNUS)
today released the following statement from CEO and Chairman Andy
Heyward, in response to recent short seller criticisms published
online and on certain social media platforms:
“Genius Brands has carefully reviewed the report and social
media comments published by two short seller funds last week. These
materials contain numerous misleading statements, omissions of key
facts, and red herrings. More importantly, the short sellers
themselves demonstrate a fundamental misunderstanding of the unique
potential of Genius Brands and our position of strength given the
current dynamics of our industry.
It is also important to keep in mind how these short sellers
make money and what they are trying to do. Make no mistake, their
intention – and indeed how they make their money – is to manipulate
the stock price of companies like ours in order to profit at the
expense of other shareholders. Their interests are directly opposed
to shareholders’ interests. In contrast, as one of the largest
investors in the Company myself, my interests are fully aligned
with those of my fellow shareholders – and will remain so.
With that in mind, I submit the following:
- We are well positioned to create substantial value –
With Kartoon Channel! launching on June 15 and to be available in
more than 100 million U.S. TV households and 200 million mobile
devices, we are positioned to be one of the preeminent ad-supported
kids’ digital networks. The service referred to as a ‘Netflix for
kids’ is made even stronger by the distinct fact that it is a free
service. There are no subscriptions fees, it is ad-supported.
Further, we do not anticipate being impacted by COVID-19. The
business of cartoons has historically had an appeal that is
timeless, and is a rare asset class which has historically been
resistant to typical market forces (e.g., the price of gold, oil,
interest rates, elections, etc.). While the rest of Hollywood is
grinding to a stop during the COVID-19 crisis, we're creating new
products for an audience that is growing now out of the new
technologies and streaming services. This is especially true at a
time when there are more kids at home and in front of their devices
during the pandemic. We believe we will see robust and accelerated
revenue growth coming forth in this arena for the foreseeable
future.
- Our balance sheet is strong – We have $9.75 million of
debt; in excess of $45 million of cash, significant receivables
from a diverse array of companies across our industry with strong
credit profiles, and low overhead. Today, Genius Brands has enough
cash on our balance sheet to meet our existing obligations and
execute on our business plan for at least 60 months, and still fund
continuing new production and content acquisitions each year.
Conveniently, last week when one of the short sellers stated we
weren’t at the same revenue point as one of our Canadian-based
competitors, he neglected to mention that the other company has
more than 60 times ($600 million) as much debt as Genius Brands. We
think identifying this omission is important to understanding the
whole story. Finally, to clear up market confusion that we believe
has been generated as a result of one short seller’s report, the
shelf registration on form S-3 filed on June 4th was related to our
capital raise in March 2020. We registered the resale of shares
underlying the warrants we issued in March, and the S-3 filing does
not in any way represent a new capital raise, nor is it related to
recent changes in our stock price.
- The short sellers’ criticisms of our Programs highlight
their own industry ignorance – Llama Llama is an
industry-recognized tremendous asset that we have on great terms,
which are mutually beneficial with the IP’s author/book publisher
and ourselves. We are also confident in the appeal of the soon to
be launched Stan Lee’s Superhero Kindergarten, one of the last
creations of Stan Lee, creator of Spider-Man, X-Men, Iron Man,
Incredible Hulk, Thor, Fantastic Four, Black Panther, and the
Avengers, among others. Similarly, we are happy with the outlook
for Rainbow Rangers. The fact is that the show’s airings on Nick
Jr. have been scaled back while we are currently producing new
episodes, which is a standard industry practice known as “resting.”
We expect the airings to ramp back up in August when the new
episodes are completed and this will be timed with the launch of
toys from Mattel hitting the shelves of Walmart in August. We are
confident Nick Jr.’s interests are aligned with ours – after all,
they have a stake in the consumer products merchandising royalties
related to this asset.
- The track record of our leadership team speaks volumes –
Our senior management comes largely from the Walt Disney Company,
DreamWorks Animation, and Hasbro Toys, and has been responsible for
many of the biggest and most profitable hits in children's
television history, as well as toy and consumer product programs
generating Billions of dollars of program sales and royalty income.
The management team and board have had creative, licensing,
production, broadcasting, and sales roles in some of the biggest
animated hits in children’s history, including Lion King, Toy
Story, Strawberry Shortcake, Care Bears, Power Rangers, My Little
Pony, Spider-Man, Batman, X-Men, Transformers, Muppet Babies,
Fraggle Rock, Real Ghostbusters, and Inspector Gadget.
Collectively, we have more than 150 years of experience in
children’s media, and have helped generate literally tens of
billions of dollars of content and consumer products sales.
Further, last Friday, we announced the addition of two of our
industry’s most accomplished executives overseeing the new channel:
Margaret Loesch as Executive Chairman of Kartoon Channel! (former
President of Marvel Entertainment, FOX Kids, and Henson
Television), and David Neuman as Chief Content Officer of Kartoon
Channel! (former President of Walt Disney Television). Margaret was
founding CEO of FOX Kids, and built it from zero to the most
successful and profitable kids program service, and what was
eventually sold to the Walt Disney Company for $5.5 billion
dollars. None of us claim to be experts at ‘short selling’. But we
also think it’s a stretch for short sellers to claim to know more
about this industry than those of us who have been industry leaders
and spent decades making money for investors while building some of
the sector’s most successful brands and companies.
- Genius Brands is a long-term growth story – We have a
number of hit brands and shows today – but we are even more excited
about what is coming, and the synergies with the newly announced
Kartoon Channel!. We have over 450 licensed products contracted
(with advances and guarantees) to come into the marketplace in the
coming months. Our pipeline of new animated products, soon to be
announced, is robust and pre-sold with significant brand equity.
Our partners, licensees, and retail customers include Alibaba,
Amazon, Mattel, Netflix, Target and Walmart, among others. Rainbow
Rangers toys from Mattel, based on our hit series on Nick Jr., will
hit Walmart stores in August beginning with a multipack of Rainbow
Rangers figures. Over 350 other licensed consumer product SKUs are
due as well, including publishing, room décor, bedding, footwear,
apparel, health and beauty, bicycles, toothpaste, touring shows,
among others, some of which are now already on Amazon.com,
Walmart.com, and Target.com.
Above all else, we are focused on long-term value. After working
with Warren Buffett for 25 years and producing the children’s
animated series with Warren to teach financial literacy (Warren
Buffett’s Secret Millionaires Club), I've learned to focus on the
importance of the basics: asset creation and value-building for our
shareholders.
On a personal note, I have not sold a single share, and in fact,
have materially increased my holdings in the Company in the last
two years. We take the views of all our investors seriously, and we
and our board are committed to maintaining the highest standards of
corporate governance and transparency.
The Company is not suggesting that any particular trading price
for the Company’s securities is appropriate, whether in the short-
or long-term. However, we would like to seek to clarify certain
facts as it relates to the short seller information that has been
put into the marketplace.
Finally, the Company reserves the right to take appropriate
legal action against Hindenburg Research and Citron Research, as we
will always do what we can to protect our shareholders’
interests.
About Genius Brands International
Genius Brands International, Inc. (Nasdaq: GNUS) is a leading
global kids media company developing, producing, marketing and
licensing branded children’s entertainment properties and consumer
products for media and retail distribution. The Company’s
award-winning ‘content with a purpose’ portfolio includes Stan
Lee’s Superhero Kindergarten, starring Arnold Schwarzenegger;
Rainbow Rangers for Nick Jr.; Llama Llama, starring Jennifer
Garner, for Netflix; award-winning toddler brand Baby Genius;
adventure comedy STEM series Thomas Edison's Secret Lab;
entrepreneurship series Warren Buffett's Secret Millionaires Club;
and Stan Lee's Cosmic Crusaders, created with Stan Lee's Pow!
Entertainment. Through licensing agreements with leading partners,
characters from Genius Brands’ IP also appear on a wide range of
consumer products for the worldwide retail marketplace. The
Company’s Genius Brands Network of channels, including Kid Genius
Cartoon Channel, Baby Genius TV, and Kid Genius Cartoons Plus!, are
available in over 100 million U.S. television households via a
multitude of distribution platforms, including Comcast, Cox, DISH,
Amazon Prime, Sling TV, Apple TV, Roku, Amazon Fire and more. For
additional information, please visit www.gnusbrands.com.
Forward Looking Statements
Certain statements in this press release constitute
"forward-looking statements" within the meaning of the federal
securities laws. Words such as "may," "might," "will," "should,"
"believe," "expect," "anticipate," "estimate," "continue,"
"predict," "forecast," "project," "plan," "intend" or similar
expressions, or statements regarding intent, belief, or current
expectations, are forward-looking statements. While the Company
believes these forward-looking statements are reasonable, undue
reliance should not be placed on any such forward-looking
statements, which are based on information available to us on the
date of this release. These forward looking statements are based
upon current estimates and assumptions and are subject to various
risks and uncertainties, including without limitation, our ability
to generate revenue or achieve profitability; our ability to obtain
additional financing on acceptable terms, if at all; our ability to
repay our outstanding debt; the potential issuance of a significant
number of shares to our convertible note holders which will dilute
our equity holders; fluctuations in the results of our operations
from period to period; general economic and financial conditions;
our ability to anticipate changes in popular culture, media and
movies, fashion and technology; competitive pressure from other
distributors of content and within the retail market; our reliance
on and relationships with third-party production and animation
studios; our ability to market and advertise our products; our
reliance on third-parties to promote our products; our ability to
keep pace with technological advances; our ability to protect our
intellectual property and those other risk factors set forth in the
“Risk Factors” section of the Company’s most recent Annual Report
on Form 10-K and in the Company's subsequent filings with the
Securities and Exchange Commission. Thus, actual results could be
materially different. The Company expressly disclaims any
obligation to update or alter statements whether as a result of new
information, future events or otherwise, except as required by
law.
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version on businesswire.com: https://www.businesswire.com/news/home/20200608005355/en/
Sloane & Company Dan Zacchei / Joe Germani
dzacchei@sloanepr.com / jgermani@sloanepr.com
Porter, Levay & Rose T: 212-564-4700 ir@gnusbrands.com
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