Special-effects studio Digital Domain to launch stock offering
Digital Domain, one of Hollywood's top special-effects shops, is ramping up its plans to go public.
The Venice-based company, which created special effects for films including "Titanic," "Pirates of the Caribbean: At World’s End" and "Transformers," hopes to sell 6 million shares at $12 to $14 each, according to the updated prospectus the firm filed today with the Securities and Exchange Commission.
Read the filing here.
The company, whose roots go back 15 years, was purchased in May 2006 for a reported $35 million by an investment group that included director Michael Bay. The group first announced plans for a stock sale in December, but many new offerings were sidelined in the first few months of this year by Wall Street’s upheaval.
Digital Domain is well known for its work in feature films and TV advertising. Yet the business has been bleeding red ink: The company lost $20 million last year on revenue of $78 million.
"Since 2004 we have been unable to generate revenues sufficient to be profitable," the firm warns in the prospectus.
Times staff writer Richard Verrier wrote in a profile of the company in May 2007 that "differences among the former owners" -- who included director James Cameron -- "and a lack of investment capital hampered the company in recent years. That allowed rivals such as Sony Pictures ImageWorks, Rhythm & Hues and Peter Jackson's Weta to cut into Digital Domain's core effects business."
"Compounding matters, Digital Domain and other U.S. visual-effects houses have been squeezed by rising labor costs and competition from rivals in Europe and Asia that are able to produce effects at a fraction of the cost," Verrier wrote.
In one good sign for potential investors, none of Digital Domain’s existing shareholders is selling stock in the deal. All 6 million shares would be sold by the company, raising $70 million (after expenses) if the stock is sold at $13 a piece, Digital Domain estimates.
The company says it expects to use $25 million to pay off debt and the rest to expand the business -- including a push into video-game development and production.
The stock would trade under the ticker symbol DTWO. San Francisco-based brokerage Thomas Weisel Partners is leading the underwriting group.
Photo: ParamountPictures/20th Century Fox
Posted April 7, 2008