Indie producer Film Department shoots for IPO this week [Updated]
[Update at 12:15 p.m.: My colleague Ben Fritz at Company Town hears that the deal has been delayed until late-February.]
In a relative rarity for Hollywood, a movie production company will try to launch an initial public stock offering this week.
But the deal from Film Department Holdings Inc. asks investors to make a giant leap of faith: The West Hollywood firm has just two films under its belt, and says it will need to secure substantial additional financing, beyond the IPO proceeds, to keep going.
Film Department is making a leap of faith, too: It has tapped a little-known securities firm to handle the stock sale. San Diego-based Girard Securities is marketing the deal via its new online IPO Solutions unit. This is the company’s first attempt to sell an IPO; it’s primarily expecting to attract individual investors to the deal -- which suggests that big-money institutional investors aren't biting.
Film Department hopes to sell 6.5 million shares for as much as $14 each, raising about $90 million. The stock would trade on Nasdaq under the ticker symbol TFDI.
The company was founded in June 2007 by industry veterans Mark Gill and Neil Sacker. Gill, 47, was president of Warner Independent Pictures from 2003 to 2006 and before that had stints at Stratus Films, Miramax Films and Columbia/Tri-Star Pictures. Sacker, 48, previously held posts at Yari Film Group, Miramax and Warner Bros.
At inception, the company had planned to produce up to six films a year, but says it was forced to curtail its ambitions in part because of the Writers Guild of America strike in 2007-2008 and surging movie production costs.
Film Department has produced two films to date: “Law Abiding Citizen,” starring Gerard Butler and Jamie Foxx, which the company says has grossed $100 million worldwide since its October release; and “The Rebound” with Catherine Zeta-Jones, which is scheduled for summer release.
In the prospectus for the IPO, the company touts itself as having “demonstrated an ability to develop, produce and sell star-driven, moderate-cost, studio-quality films.” Film Department also pitches its business model as risk-averse: The company says its plan is to license its films internationally to cover a minimum of 80% of the net film budget.
Yet the firm struggled with financing last summer. Part of the proceeds from the IPO would be used to pay down $29.5 million in accumulated debt.
Film Department also estimates that it needs $157.5 million in new credit to pay for distribution and marketing of its near-term film projects, including the romantic comedy "Earthbound" with Kate Hudson and Gael Garcia Bernal.
“We require additional financing, and without it we may have to limit or discontinue our operations,” the firm says in the prospectus. “There is substantial doubt about our ability to continue as a going concern.”
Warnings about risk are boilerplate in IPO documents, of course, but in this case investors would do well to read those warnings very carefully.
-- Tom Petruno
Top photo: Mark Gill. Bottom photo: Neil Sacker. Credit: Film Department Holdings