Risk & Compliance

SeaWorld Fined $4M for Hiding ‘Blackfish Effect’

The company and its ex-CEO James Atchison allegedly misled investors about the documentary's negative impact on its business and reputation.
Matthew HellerSeptember 20, 2018
SeaWorld Fined $4M for Hiding ‘Blackfish Effect’

SeaWorld Entertainment and its former chief executive have agreed to pay $5 million to settle charges that they misled investors about the negative impact on its business of a documentary film about alleged mistreatment of orcas at its theme parks.

The U.S. Securities and Exchange Commission said SeaWorld and former CEO James Atchison knew the film “Blackfish” had caused a decline in ticket sales and profits after its release in July 2013 but failed to disclose the “Blackfish effect” to investors.

As late as April 2014, SeaWorld said in a civil complaint, Atchison did not disclose the film’s harm to SeaWorld’s reputation to the underwriters of a secondary stock offering.

After the company finally acknowledged in August 2014 that its declining attendance was, among other things, caused by negative publicity connected to “Blackfish,” its stock fell about 33% and was significantly downgraded by analysts, causing a loss of approximately $830 million in shareholder value.

To settle the SEC’s charges that they made “untrue or misleading statements or omissions about material facts relating to the ‘Blackfish’ effect,” SeaWorld and Atchison — who resigned in December 2014 — agreed to pay fines of $4 million and $1 million, respectively.

“This case underscores the need for a company to provide investors with timely and accurate information that has an adverse impact on its business,” Steven Peikin, co-director of the SEC Enforcement Division, said in a news release.

According to the SEC, an internal study presented to Atchison in October 2013 showed the film’s effect, with 32% of respondents saying they had a less favorable opinion of SeaWorld compared to 11% who had a more favorable opinion.

As a number of high-profile musical acts cancelled their performances at SeaWorld, citing “Blackfish,” a senior officer in the company’s communications department complained in an email that its reputation was “positively radioactive.”

But in an article published in December 2013, Atchison was quoted as saying, “As much data as we have and as much as we look, I can’t connect anything really between the attention that the film has gotten and any effect on our business.”