Genius Brands International, a children’s media company, said Monday that recent short reports are full of “misleading statements, omissions of key facts, and red herrings.”
The stock trades around $5.20 per share, after rising from 73 cents on May 12 to as high as $7.93 on June 3.
Genius’ response was penned by CEO and Chairman Andy Heyward. He wrote that as one of the largest investors in the company, his “interests are fully aligned with those of my fellow shareholders — and will remain so.” Over the past two years, the CEO said he has been increasing his personal stake in the company and has “not sold a single share.”
Having said that, Heyward’s statement is meant to “clarify certain facts as it relates to the short seller information that has been put into the marketplace.”
[Editor’s Note: Short-seller Hindenburg Research on June 5 said the recent runup in Genius Brand shares would be short-lived, claiming the stock would drop to $1.50 within a month. Hindenburg said part of the reason is selling pressure from 131 million shares and share equivalents issued from recent financing rounds that will become available to trade within an estimated two to four weeks.]
Creating Value. Genius is “well-positioned” to create value for investors, Heyward wrote. The Kartoon Channel! is scheduled to launch on June 15 and will be available to more than 100 million U.S. TV households and 200 million mobile devices. This would position the company as “one of the preeminent” ad-supported kids’ digital networks.
Balance Sheet Update. The company has enough cash on its balance sheet to meet its existing obligations and operate on its business for at least 60 months, including funding new production and content acquisitions, according to the CEO.
Pointing Out “Industry Ignorance.” The short-seller report’s criticism of Genius’ programs “highlight their own industry ignorance.” As an example, the short seller report pointed out “Rainbow Rangers” being scaled back on Nick Jr.
However, Heyward said this is “standard industry practice” and will ramp again in August with new material along with a planned launch of toys from Mattel.
Management Team Strength. The management team is composed of industry veterans responsible for “many of the biggest and most profitable hits in children’s television history.”
“Collectively, we have more than 150 years of experience in children’s media, and have helped generate literally tens of billions of dollars of content and consumer products sales,” the CEO wrote in the release.
Long-Term Story. Finally, Genius Brands represents a long-term growth story with more than 450 licensed products contracted with advances and guarantees that will enter the market in “the coming months.” The company will also introduce 350 other licensed consumer product SKUs across other categories, like apparel, publishing, touring shows, among others.
“After working with Warren Buffett for 25 years and producing the children’s animated series with Warren to teach financial literacy (“Warren Buffett’s Secret Millionaires Club”), I’ve learned to focus on the importance of the basics: asset creation and value-building for our shareholders,” Heyward wrote.
This story originally appeared on Benzinga.
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