82.1 F
San Fernando
Thursday, Mar 28, 2024

COMICS—Stan Lee Media In Struggle With Foe Tougher Than X-man

While acknowledging some responsibility for the collapse of Stan Lee Media, ousted company co-founder Peter F. Paul says there’s plenty of blame for the dot-com’s demise to go around. The Encino-based Internet company suspended operations and laid off most of its staff last month amid a flood of red ink and an investigation by the Securities and Exchange Commission into alleged misuse of company funds by former employees. The company’s Internet sites remain in operation while its top brass struggle to secure financing to meet its obligations. Company President and Chief Executive Officer Kenneth Williams said he is aware of the SEC investigation, but would not elaborate further. In a written statement, Williams said, “The company plans to cooperate fully with the investigation and to turn over to the SEC any information in its possession which may be helpful to the investigators.” The company says the SEC is looking into the alleged illegal trading in company securities by individuals and outside firms, as well as the alleged misuse of company funds by former employees. Company officials discovered evidence of the apparent misuse of funds during an internal investigation, according to an SEC filing. An SEC spokesman said he would neither confirm nor deny there was an investigation being conducted. The company has terminated a contract with con-sulting firm Paraversal and with its co-founder, Paul, who had been Stan Lee Media’s driving force for much of its existence. A contract with Stephen Gordon, the company’s executive vice president of operations, was also canceled. Paul said last week that his ouster was part of the company’s reorganization under a new management structure and not the result of any wrongdoing. “All the reorganization charts didn’t include a spot for me,” said Paul, who remains a major stockholder of Stan Lee Media, with about 2 million shares. “It’s all part of a general restructuring,” he said. But Williams told Dow Jones News Service last week that Paul was fired “for cause,” though he would not comment when contacted by the Business Journal. The probe into the company’s dealings comes after it suspended operations Dec. 16, citing its inability to secure further financing. As a result, all but a few of the company’s 129 employees were laid off. A handful remain to conduct a strategic search for more funding, officials said. The value of Stan Lee shares had fallen to 13 cents when trading was halted Dec. 18. Nasdaq officials have asked the company for information about its operations. “The sooner they provide us with information, the sooner they can begin trading again,” Nasdaq spokesman Mark Gunderson said, adding that the specifics of the request are not matters of public information. Stan Lee Media’s value peaked last February when shares traded at $28.18 apiece before dropping to 13 cents at its final close. Sources at the company said the company namesake and founder Stan Lee may seek agreements with television and film producers to pursue projects that would not require Web-based animation, as had been the company’s initial strategy. Lee himself could not be reached for comment. Analysts tracking the stock said they would not comment on the company’s troubles, citing an ongoing SEC investigation. But company General Counsel Rick C. Madden said last week that short sellers contributed to the stock’s rapid plunge. Paul said the company’s so-called “death-spiraling financing” was to blame. Issuing convertible securities with no floor price for converting into common stock forced the stock’s downward spiral. Such financing, he explained, forced the company to issue more stock and pushed down its value and gave investors a bigger stake in the company. Madden said margin calls contributed to the company’s woes. Paul, who owns 27 percent of the company stock, admitted he was forced to sell some of his holdings during the selling binge. “I never really intended to sell any of my stock,” he said, explaining that the shares were liquidated against his wishes because they were security for a loan. In its last nine trading sessions, the company lost more than 70 percent of its value in furious trading that saw unprecedented volume for the stock before it came crashing down to earth, much like some of Stan Lee’s superheroes. From its August 1999 launch to the end of the third quarter in September 2000, the company had $1.2 million in revenue, lost $26.9 million and burned through $22 million of its cash reserves. Although the company’s fate is not unique in the dot-com world, its rapid decline is. Two months ago, the company agreed to a deal that would give it $2.2 million in cash and an equity line of up to $40 million from investors that was pegged to stock performance. As a so-called glamour e-stock featuring well-known comic book writer Stan Lee, the company got off to a rousing start with its initial public offering in 1999. Lee is known for his popular comic-book heroes Spider-Man, the Hulk and the X-Men. But his involvement on the company’s business side has been said to be marginal. He left most of that to his management team, while he himself concentrated on the creative side of the business. Although the company’s fortunes have headed south, Lee’s popularity has soared with the creation of two made-for-Internet superhero series, dubbed “The 7th Portal,” and “The Accuser.” With new so-called “Webisodes,” the company’s interactive Web sites in the U.S., Latin America and Mexico gained plenty of attention from Web surfers, but little revenue.

Featured Articles

Related Articles