For most investors who own shares of Genius Models Worldwide (GNUS 11.54%), keeping the stock has been a punishing knowledge. It is really down 36% calendar year to date to just $.70 a share — producing it a penny inventory. However, the company’s underperformance isn’t going to glance set to adjust in spite of a latest licensing deal with Walt Disney‘s Marvel Studios.
An amazing library of mental home
Genius Models is a children’s amusement company. Its flagship streaming support, Kartoon Channel, is obtainable by way of Roku, Apple Tv, and quite a few other digital tv platforms. It characteristics initial articles, these as the preschool shows Llama Llama and Rainbow Rangers (two seasons of which are also obtainable on Netflix). But traders should shell out closer attention to its acquisitions.
In 2020, the corporation struck a joint venture with POW! Entertainment to purchase the Stan Lee (creator of Marvel Comics) title and article-Marvel intellectual assets (IP). This offer gave Genius Manufacturers entry to in excess of 100 Stan Lee unique creations not involved in Marvel Amusement — which was acquired by Walt Disney for $4 billion in 2009. Now, Disney is circling again for some of this possibly beneficial materials.
Disney (by using Marvel Studios) has signed a 20-12 months deal with Genius Makes to license Stan Lee’s identify and likeness for upcoming films, Tv set productions, or amusement parks and experiences. But whilst this can be seen as a vote of assurance in Genius Brands’ acquired IP, the corporation has not supplied enough coloration on the deal’s income implications. The deal also has a disappointingly minimal scope — Disney was only intrigued in Stan Lee, not the portfolio of IP he produced soon after he left Marvel Comics.
Management has continually failed to execute
These information subject since Genius Models wants all the assist it can get. The enterprise has persistently failed to switch amazing-sounding headlines into sustainable value for buyers. And the very first-quarter earnings report it sent past 7 days only highlighted its ongoing, uninspiring performance.
Revenue did bounce by 35% 12 months over 12 months to $1.4 million as the corporation expanded international viewership of Kartoon Channel and launched Stan Lee’s Superhero Kindergarten in China. But that progress was essentially canceled out by a 46% surge in full functioning charges to $11.4 million, foremost to an running reduction of $9.9 million — seven moments additional than profits.
A whopping 96% of Genius Brands’ running outflows are classified as “basic and administrative.” And the lion’s share of the initially-quarter surge in bills was owing to a $1.9 million boost in share-primarily based payment and $1.2 million much more getting invested on a mix of larger spend and elevated outlays for administrators and officers insurance. Buyers spend the cost for management’s largesse in equity dilution. As of the close of Q1, Genius Brands’ shares fantastic had elevated by approximately 6% yr more than yr to 304 million.
Stay clear of Genius Brands
In spite of its library of promising intellectual residence and its superior-profile licensing deal with Walt Disney, Genius Brands’ stock continue to appears to be like to be a poor wager. Management’s compensation would seem disproportionate to genuine business enterprise general performance, and the end result is an procedure that burns cash and dilutes shareholders. Never be left holding the bag.