July 11, 2005
Shrek and Donkey Headed to Court on Another Adventure
DreamWorks Animation SKG, the animated film company split off from the larger DeamWorks studio in an IPO last year, is headed for court and embroiled in an SEC insider trading investigation. The company, which produced the Shrek movies among others, had a less-successful release this summer (Madagascar), and in May announced poor first quarter earnings due to problems with the DVD release of Shrek 2, which has not been as successful as hoped. The company disclosed all sorts of litigation problems, including an SEC investigation into trading before the May earnings announcement (which was gloomy, so this is a loss avoided situation) in a press release (available on company website here under "News"):
The company also noted that six purported class action lawsuits have been filed in recent weeks against DreamWorks Animation and certain officers and directors, alleging violations of federal securities laws. The company believes these lawsuits are without merit and intends to vigorously defend itself against them. In addition, DreamWorks Animation has received a request from the staff of the Securities and Exchange Commission and is voluntarily complying with an informal inquiry concerning trading in its securities and the disclosure of its financial results on May 10, 2005. The SEC has informed DreamWorks Animation that the informal investigation should not be construed as an indication that any violations of law have occurred. The company intends to cooperate fully with the inquiry.
The stock price dropped approximately $6 per share in May, around the time of the earnings announcement, from $38 to $32. For a company this young -- in only went public last November -- this is awfully quick for an insider trading problem to erupt. Then again, in Hollywood, people aren't known for keeping secrets, and anything is possible because even Mike Myers can win the hand of Cameron Diaz. (ph)
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