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SeaWorld president out; stock rises

Cost-cutting layoff plan continuing

SeaWorld Entertainment today (December 11) ousted its president and chief executive officer, Jim Atchison, who will become vice chairman of the problem-plagued company. Chairman David D'Alessandro will be interim chief executive. The stock rose 2.88 percent to $16.09 on the day.

SeaWorld is cutting $50 million of its costs, and will make layoffs that haven't been revealed. SeaWorld's revenue, attendance, and earnings have been hit, partly by the widespread viewing of the documentary Blackfish, which exposed the risks — including deaths of trainers— of keeping killer whales in captivity. Initially, its executives wouldn't go on camera to denounce the film. Then the company blasted the movie and launched an expensive public relations campaign that didn't seem to quell the criticism.

The stark decline in the company's stock is in large part a result of it being extremely overpriced from the beginning. It went public in April of last year at $27, shooting almost to $34 the first day of trading. But the company was (and still is) laden with debt. No proceeds of the offering went to SeaWorld. Wall Street's Blackstone Group had bought the company in 2009 and loaded it with debt for the purchase. Proceeds of the offering went to pay back Blackstone and other investors for their initial investment, which they made through Cayman Islands entities. At its offering price, SeaWorld sold for 27 times earnings while competitor Six Flags sold for 12.1 times earnings and Disney for 19. At the time, I said the offering "shines and stinks lack a mackerel in the moonlight," but I was red-faced for many months until reality set in.

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SeaWorld Entertainment today (December 11) ousted its president and chief executive officer, Jim Atchison, who will become vice chairman of the problem-plagued company. Chairman David D'Alessandro will be interim chief executive. The stock rose 2.88 percent to $16.09 on the day.

SeaWorld is cutting $50 million of its costs, and will make layoffs that haven't been revealed. SeaWorld's revenue, attendance, and earnings have been hit, partly by the widespread viewing of the documentary Blackfish, which exposed the risks — including deaths of trainers— of keeping killer whales in captivity. Initially, its executives wouldn't go on camera to denounce the film. Then the company blasted the movie and launched an expensive public relations campaign that didn't seem to quell the criticism.

The stark decline in the company's stock is in large part a result of it being extremely overpriced from the beginning. It went public in April of last year at $27, shooting almost to $34 the first day of trading. But the company was (and still is) laden with debt. No proceeds of the offering went to SeaWorld. Wall Street's Blackstone Group had bought the company in 2009 and loaded it with debt for the purchase. Proceeds of the offering went to pay back Blackstone and other investors for their initial investment, which they made through Cayman Islands entities. At its offering price, SeaWorld sold for 27 times earnings while competitor Six Flags sold for 12.1 times earnings and Disney for 19. At the time, I said the offering "shines and stinks lack a mackerel in the moonlight," but I was red-faced for many months until reality set in.

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Comments
26

Thank heaven you can say again that SeaWorld "shines and stinks like a mackerel in moonlight" without embarrassment.That's the best analogy I've read in a long time -- and it can be applied to many other fishy local financial enterprises besides. We also appreciate your clever marine headlines on recent SeaWorld stories listed above.

Dec. 12, 2014

monaghan: "Shines and stinks like a mackerel in the moonlight" was uttered by John Randolph of the U.S. House of Representatives, probably around 1800. I just looked it up in Bartlett's, which has it, "He shines and stinks like rotten mackerel by moonlight."

I probably will not be able to take credit for headlines above. I suggest headlines, but an editor writes them, often ignoring my suggestion -- and usually improving on my prose. Best, Don Bauder

Dec. 12, 2014

The Reader's headline writers come up with the most clever headlines, always an improvement on whatever I have submitted. Aw, to be a comedy writer . . .

None

Dec. 13, 2014

Ken Harrison: You're going to have to explain that remark to me. I can see two separate meanings. Best, Don Bauder

Dec. 13, 2014

Don, this scenario is typical of so many of the public offerings that we see nowadays. They're taken over by a private equity group, sometimes for what looks like a premium price, and "restructured." That can mean that valuable assets can be stripped out of the entity--such as real estate carried on the books at its original purchase price--and then it can be loaded with debt. Then it is offered to the public as a wonderful investment, and Wall Street goes along with the claim, and the stock gets an outsized value in the offering. We can measure the giddiness of he market by how much it runs up in the hours and days following the offering.

The real question is why anyone falls for these deals. Is Wall Street so hungry for new shares to trade that it sells its clients buckets-full of snake oil routinely? I can't think of any other reason. But I for one avoid IPO's, even though a few of them may be good ones. Too many stink.

Dec. 12, 2014

Visduh: Excellent points, and the real question is whether this should be legal. The takeover group loads a company that may already be publicly-held with debt, and takes it private. (What good does that do?) Then the takeover bandits take the company public a second time, and the proceeds of the offering go back to the bandits to cover their original costs.

So you have a company that is much weaker than it was before all this monkey business. So it is worth less. But the company's second IPO soars because it is manipulated. Suddenly, a weaker company sells for a higher price than before, and the Wall Street takeover gang is much richer.

The transaction is often, if not usually, done through offshore tax and secrecy haven institutions, as SeaWorld was.

The experience with Petco is a classic example. See the columns I have done on it.

And think: one of the masters of this corrupt business, Mitt Romney, ran for president and almost won. Best, Don Bauder

Dec. 12, 2014

A properly skeptical investment community, meaning the investors and financial advisers, would make all this moot if they were paying attention. For all the analytical tools available in this cyber age, there are still these abusive offerings, and I can only assume that they are a benefit to those who peddle them, regardless of the real merit.

Dec. 12, 2014

Visduh: Time after time, new issues (now called initial public offerings, or IPOs) soar to heights that are unbelievable. If you read the prospectus, you see that the company has almost no value, perhaps negative value, and slim prospects compared to its competitors.

But the fast-buck gamblers know that IPOs are manipulated, so they jump aboard for a fast ride up. Then they bail out. The stock crashes. Left holding the bag are the small investors who didn't know this hanky-panky was going on.

One of the purposes of Wall Street used to be to fund emerging businesses. But now Wall Street is just a big gambling casino, and when its gambles backfire, the taxpayers bail it out. If the funding bill passes Congress in its current form, Wall Street will be able to gamble with derivatives and know that if the bets fail, the taxpayers will come to the rescue. If the bill in its current form passes, we are almost guaranteed another 2008/2009 crash/bailout. Best, Don Bauder

Dec. 12, 2014

SEAS closed down 1.5% today. Then up in after-hours trading. But today was an ugly day for the DOW.

Dec. 12, 2014

Ponzi: Yes, the stock market seems to be tanking along with oil. Some are worried about deflation worldwide. It is a valid concern. Most of Europe, Japan, Russia, and Venezuela appear headed for recession. The last two may get depression. There is an oversupply of oil combined with weak international demand.

Whether the Saudis are trying to knock out higher-priced North American oil, such as that produced by fracking, or trying to belt Iran, is hard to determine.

Obama keeps talking about "recovery," but in actuality, there hasn't been a significant one, except for the stock and bond markets and the upper 1%. Pew Research just completed a study saying that Americans are 40% poorer now than they were in 2007, before the Great Recession really got underway. (It began in very late 2007.) Median net worth of households was $81,400 in 2013, down from $135,700 in 2007. For African-Americans and Hispanics it was $11,000 and $13,700, respectively, last year, also down from 2007. This widespread economic weakness, along with reactions to killings by police, and a Congress that keeps slashing entitlements, could produce a powder keg.

I think the world's central banks will escalate money-printing in 2015. They've been doing it frenetically since early 2009. At some point, it doesn't work anymore, and in the U.S., the Fed's balance sheet is in such tatters that it may be difficult to ease more. We could have parlous times next year, although at this point I think central banks' easy money may give us more time. Best, Don Bauder

Dec. 12, 2014

Don, this oil "glut" came as a surprise, at least to me. Do you have a short answer as to why the oil glut appeared so quickly and so deep? It almost seems like is was planned. Did the US begin dumping oil in the marketplace to punish Russia and the Middle East? How did the over-supply materialize so rapidly?

Dec. 12, 2014

Ponzi: Very good observation, and I have neither a short nor a long answer. Long before the price plunge came, analysts knew there was an oversupply, with the U.S., Russia, the OPEC countries and other nations pumping out oil, while the world economy stumbled along. I don't know of anyone who predicted a rapid price plunge, although probably somebody did.

But suddenly, the futures markets took cognizance of what was going on, and hammered the oil prices. Perhaps analysts thought that OPEC and other countries would limit supply for their own protection. But it hasn't happened, although I believe it will. Best, Don Bauder

Dec. 13, 2014

For many years I've concluded that the "market" for oil was not a free market at all. It was, and still is, manipulated by all the participants, although some have more clout at various times than others. I recall back in about 2008 or whatever year we saw $4+ a gallon gasoline, someone asked Bushie what he was going to do about it. He protested in his West Texas twang that he could do nothing to affect the price or supply of gasoline. Talking about the voters being stupid? There was plenty he could have done to increase the supply and reduce the price. Maybe the price of crude is finally settling to a level where it belongs, helped along by increased US domestic production.

Dec. 14, 2014

Visduh: Good observations. Yes, the plunge in the price of oil is definitely helped along -- if not propelled -- by increased U.S. production of oil. The U.S. could do something about the plunging price of oil: it could ban fracking, which should be banned for ecological reasons anyway. Best, Don Bauder

Dec. 14, 2014

There's no recovery until I can get a home mortgage with just my signature, if were shooting for pre-2007 conditions. But $2.70 gas ain't bad! Now if we can just get the grocery industry to give us back a standard 16 oz of canned whatever and sell us a full 1/2 gallon of ice cream, everything would be fine.

Dec. 13, 2014

Ken Harrison: Obviously you have noticed that providers of grocery products are raising prices by putting less product in the packages, but keeping the price the same.

You would not want to get a home mortgage with just your signature, as was happening in the housing bubble pre-2007. Look what resulted. There were some of us warning that mortgage terms were ridiculously easy, lenders weren't asking for necessary information, but nobody listened. The Federal Reserve didn't see what was coming. Best, Don Bauder

Dec. 13, 2014

I want to see lean ground beef at $3/lb or less. Beef is getting close to its worth in gold, er, at least silver.

Dec. 14, 2014

Visduh: What you would really like to see is beef plunging at the rate gold did. You could gobble up beef to your heart's content. Best, Don Bauder

Dec. 14, 2014

I'm more like 70% poorer than I was in 2008, when I had a quite comfortable retirement fund. I'm going downhill, eating my seed corn to maintain my "lavish" lifestyle. I always said that I'd like to die in debt, but have this bad habit of paying my bills.

Sea World is a pretty good measure of the maturity of its customers, especially since it has lost the most mature segment that it once had. It once had an excellent research arm, but Carl Hubbs must be spinning on porpoise up there now. Actually Hubbs Sea World may still have excellent people, but the whole company stinks like any other that is operated by striped MBA's. Seems like their eating their whale of a company from the inside out, leaving the stockholders with nothing but a plastic "model blackfish."

The bottom-feeders that hollowed out so many companies in the 80's and 90's seem to have propagated themselves and the idea that their practices are "just good business" instead of smoke and mirrors.

Dec. 12, 2014

Twister: I agree that MBAs get part of the blame for this hollowing out of corporations. It would be more accurate to state that beginning in the late 1970s and early 1980s, corporations decided that the only thing important was next quarter's profits. So corporations began trying every trick in the book, including phony accounting, to keep Wall Street happy quarter by quarter.

Sell assets and lease them back, send manufacturing overseas to low- and slave-wage nations, shortchange customers and employees -- anything to run up the stock so that the chief executive and his/her coterie can be paid ridiculous salaries.

The business schools cranking out MBAs bought into this mentality.

The result of all this was a nation bereft of a manufacturing base, and, most tragically, the horrendous wealth and income inequality that will eventually be our undoing. Best, Don Bauder

Dec. 13, 2014

I am reminded by Twister's comment of very long-ago Cambridge, MA, where there was a legendary bar/restaurant named Cronin's that actually had whale on the menu. It wasn't orca, either.

Dec. 13, 2014

monaghan: I remember eating shark at a San Diego restaurant. I can't remember its name. It specialized (or specializes) in seafood. I don't remember if whale blubber was an appetizer. Best, Don Bauder

Dec. 14, 2014

Orcas are now able to get into previously (climate warming) iced-up parts of the Arctic Ocean and are decimating narwhal populations. It might (or might not) be advisable to hunt Orcas there until the ice comes back. Orcas are cute, but narwhals are magical . . .

Dec. 15, 2014

Twister: Are you suggesting Sea World should round up all the orcas and house them at their entertainment complexes? That would rile up even more animal lovers. Best, Don Bauder

Dec. 15, 2014

Brain Drain, Talent Drain--From Trickle-Down to Drought: The Evisceration of America

Dec. 13, 2014

Twister: Trickle-down economics will inevitably lead to an economic phenomenon similar to drought. Yet we keep electing politicians who favor trickle-down economics, usually by another name. Best, Don Bauder

Dec. 14, 2014

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