Image Stock Dips Below $130 Jun, 2008 By: Erik Gruenwedel
Fallout from last week's $10.4 million write down of its DVD catalog resulted June 30 in shares of Image Entertainment Inc. falling more than 11% to close at 93 cents for the first time.
According to Nasdaq regulations, stocks on the exchange must maintain a price of at least $1 per share. If a stock dips below that amount for 30 consecutive business days, the exchange can take action to remove or de-list it.
Chatsworth, Calif.-based Image took the charge as a preemptive move aimed at cleaning its fiscal slate in preparation for a distribution strategy based largely on cast-driven feature films and digital distribution, among other options.
Edward Woo, media analyst with Wedbush Morgan Securities in Los Angeles, said a sub-$1 stock was not automatic grounds for delisting as Image could opt for a reverse stock split. He said it was more important that Image maintain a minimum equity value.
“Once a stock gets de-listed, it's not a big deal because it can always trade over the counter,” Woo said.
He said the bigger issue was how Image got there in the first place, which Woo said was likely by losing a lot of money.
“How can they shore up the stock?” Woo said. “The easiest [but hardest to do] is to start making money or getting investors to believe in the company to drive the stock price up.”
Image president David Borshell implored as much, when, in a call last week with investors, he said shareholders should not lose focus on the distributor's infrastructure and unique relationships with studios and big box retailers.
“Based on these factors alone, management does not believe that Image's current share price accurately reflects the true value of the company,” Borshell said.
Separately, Image said the $3 million held in trust in connection with the failed merger agreement with BTP Holdings was disbursed with $2 million returned to Image and $1 million plus accrued interest to BTP.
As part of the settlement, both parties agreed not to pursue further litigation or business interruption fees.
More importantly, Image and BTP amended a previous distribution agreement with an interim deal that allows Image to continue distributing select ThinkFilm and Capitol titles.
Image has released ThinkFilm titles Before the Devil Knows You're Dead, Numb and The Air I Breathe, among others.