Weird things are happening at the James Cameron-founded company that’s responsible for special effects and 3D conversion on many Hollywood productions including Lionsgate’s Ender’s Game. Digital Domain‘s stock is down nearly 34% today to a piddling 65 cents a share and it announced in an SEC filing that CEO and chairman John Textor resigned “effective immediately” with no exit agreement or arrangement. Textor’s Wyndcrest Holdings led an investor group that bought Digital Domain in 2006. He told the board that he left because he’s “in profound disagreement” with the company’s decision to close its animation and visual effects studio in Port St. Lucie, Fla. “Our incredibly talented artists and filmmakers were building something truly special in Port St. Lucie, not just our favorite first film, The Legend Of Tembo, but also our first home, Tradition Studios.” By leaving he says he should have “greater flexibility to independently consider other strategic alternatives for the Company, the Port St. Lucie studio and the people affected.” Digital Domain says the cutbacks in Florida are part of “a strategic realignment that will enable it to focus its resources on its core business.” Studios in California and Vancouuver “intend to operate without interruption.” The board gave COO Ed Ulbrich the additional title of CEO of Digitial Domain Productions while Michael Katzenstein runs day-to-day operations. Katzenstein is is a senior managing director of FTI Consulting, and on August 29 was also named Digital Domain’s interim COO.
The company is widely believed to have overexpanded in recent months. But the turmoil began in mid-August after the company disclosed that its available cash fell short of the levels required by a covenant in an agreement with holders of a $35M Senior Note. On August 21 the debt holders told Digital Domain that it was in default — and that they wanted their money back, plus $16M in interest. The company doesn’t have the cash, and began to negotiate with them to hold off a foreclosure. On August 22 the company board created a special committee to review all options. When the board brought Katzenstein in to set things straight, Textor said he might make a “strategic alternative transaction” with the company. Digital Domain has lost about 90% of its market value since the beginning of this year. Janney Capital Markets analyst Tony Wible just dropped coverage of the company after downgrading to “Sell” saying that “the elimination of staff, review of strategic alternatives, departure of management, and debt negotiations all cloud growth prospects. We also do not know the motivation of the debt holders, which may be seeking to take over the equity or are merely looking for more favorable terms on the debt.”


“a strategic realignment that will enable it to focus its resources on its core business.”
gotta love corporatespeakTM
Outsourcing…selling assets…laying off employees…seeking new conglomeration to purchase % of business (aka debt)… gotta love the way it works these days. Built on a fictional pillars of potential liquidity, propped up by invisible beams of credit, and ultimately burdened by it’s own costs (employees, materials, production…), then swapping it’s own debt for someone else’s.
Didn’t that Chinese Company Galloping Horse just inject $10M of cash at $9.20/share into the company a few months back? Vaporized cash. Brutal.
What a fucking disaster.
It means “getting the hell out of the student slave labor business.”
Families moved out to Florida for that facility. So sad. Seems like some bad management decisions and financial accounting led to its closing. Really interested to hear more about how it go so screwed up so quickly. As a company, DD is busy with tons of film work currently, so it’s so odd they didn’t have the debt/funding together enough when they moved forward with their first animated film and studio in order to actually stay open and deliver it.
Wondering it the film will get produced elsewhere. I’m sure there’s a completion bond on it. Anyone know more info on these questions?
Yeah, of course the little guys will be the ones punished for the big guys’ bad calls; god bless
‘Merican capitalism. I worked there eons ago, and found the culture pretty dysfunctional and toxic — aside from blatant non-merit-based favoritism, they substituted a top-down attitude of instilling holier-than-thou snarky hubris, in lieu of reasonable hours and compensation for their cocky-but-overworked minions.
WHO didn’t see this coming? I feel bad for the artists in Port St. Lucie, but they’re so easily suckered by believing that if they do great work, things will work out fine. Considering the talent involved, I have no doubt they’d produce a movie I’d pay to see.
But–Digital Domain (and stop saying James Cameron is involved—he hasn’t been in a LONG time) is a service company for the film industry. They’ve done great work. But they’ve never turned a very big profit. Their first public offering didn’t interest anyone. They’ve never created content from scratch.
As sorry as I feel for the artists, I feel worse for the taxpayers of Florida who are left holding the [tax] bag. But I don’t feel sorry for the many City, County, State, and private investors who were lazy enough to NOT do their homework. It’s NOT that hard.
As a proud American, I can’t hope enough the recent turn of events finds DD in better hands.
If Warner Brothers were smart, they’d dive in and get things going.
James Cameron might have founded the company, with Stan Winston, but both jumped ship years ago. Michael Bay now owns part of Digital Domain. Coincidentally Cameron now uses Peter Jackson’s Weta for most of his effects work.
Would love to hear how much they are promising that this won’t affect the work on Ender’s Game!!
All that’s left is for the fat lady to sing.
Feel truly sorry for all those at DD waiting for the other shoe to drop.
So, is this the end for the former In-Three division as well? Or are they bringing it back to LA? And what about Abu Dhabi’s $$$, and their deal with Reliance?
The Bay group was over promising and manipulating teh business plan from the beginning. This is a breakeven business that should have never gone public, should have shorted this stock on day 1. Karma!
…and what about the poor folks let out to pasture?. Are they getting severance pay, are employees who relocated being compensated, etc.?.
Being one of the people let go, they gave us no warning and we will only be getting paid for the last 2 weeks of work, no more.
Camie can buy it and sell it a second and third time , providing it’s sold to the ‘right’ buyer…..