Wall Street Goes 'hollywood"

Last year, we told you investors were looking for proven management and a history of solid performance. Well, they changed their minds.

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THE CORNER OF WALL STREET AND VINE

Entertainment companies steal the limelight.

What is it about the movies that makes otherwise rational men and women want to own a piece of them? Damned if we know, but a slew of glitzy movie and television companies made their debut on Wall Street in 1986, and the fans, well, they just went wild.

The curtain went up in May, with a $22-million initial public offering by De Laurentiis Entertainment Group Inc., a company headed by big-time producer Dino De Laurentiis -- he of King Kong, Serpico, and Ragtime fame. Never mind that the business had recently lost $1.5 million in the space of only seven months. Or that the prospectus contained a strong warning about the company's ability to meet interest payments. Or that future releases might be box-office clunkers. (DeLaurentiis, remember, is also the guy who brought us the immortal remake of Hurricane.) None of that mattered, as the stock climbed from its offering price of $12 a share to $19.25 within a few weeks.

By then, Wall Street was beginning to resemble the Sidewalk of Stars. July, for example, brought a $13.3-million IPO from Imagine Films Entertainment Inc., a company formed by Hollywood producer Brian Grazer and actor-turned-director Ron Howard, better known, perhaps, as "Richie Cunningham" on "Happy Days." In the past two years, Grazer and Howard have collaborated on Spash and worked separately on such movies as Spies Like Us and Cocoon. "Neither Mr. Grazer nor Mr. Howard has had any material prior experience [running] a business enterprise," warned the prospectus. Nor, it continued, would there would be much of a business without them. But fans weren't dissuaded: in a few weeks, the stock rose from $8 to $14.75.

Then came New Line Cinema Corp., which raised $6.4 million with its IPO in September, largely on the strength of such low-budget classics as A Nightmare on Elm Street and Critters. That was followed by Carolco Pictures Inc., whose principal asset is Rambo. The Company was looking for money to finance Rambo sequels, a Rambo cartoon show, Rambo toys, and the like. Investors obliged to the tune of $37.3 million -- which goes to show that there's no accounting for taste.

While movie companies were stealing the limelight, television producers struggled to get their own acts together. The first to file, in September, was Lorimar-Telepictures Entertainment Corp., which spins out the likes of "Dallas," "Falcon Crest," and "Knots Landing," but it withdrew its offering in November. Dick Clark, on the other hand, didn't miss a beat. The veteran host of "American Bandstand," whose company is aptly named Dick Clark Productions Inc., hit the Street with a $7.2-million issue in early January 1987.

Will these newly public companies live up to their billings? Will the hits keep on coming? Harold Vogel, Merrill Lynch Capital Markets's entertainment industry analyst, has his doubts. Strip away the glamour, he says, and "there isn't much for investors to look at on a balance sheet." But, hey, if you've got Sylvester Stallone, who needs a balance sheet?

THE CULT OF PERSONALITY

What some investors won't do to stand by their man.

You can go a long way on Wall Street with a good story, and -- when it comes to stories -- Michael D. Dingman's ranks right up there with "Snow White and the Seven Dwarfs." Dingman is the chief executive of The Henley Group Inc. If you don't recognize the company's name, that may be because it didn't even exist until a few months prior to the offering. Then Allied-Signal Inc. decided to spin off some 35 of its turkeys, and we do mean gobblers. We're talking here about businesses that, as a group, lost $65.4 million in 1985. Dingman took them over and brought the collection public for $1.2 billion in May, one of the largest IPOs in history.

You say that's preposterous? You ask how such a company could possibly be worth $21.25 per share? In the minds of investors, the answer lay in Dingman.

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