Chapter 454 Failed Investment
At that time, the share price of Sinclair Group was around US$25, and the 23.38 million shares they pledged were worth about US$585 million.
You must know that the stock price of Sinclair Group has been very stable in recent years. Using these stocks worth US$585 million as collateral for a loan of US$450 million, banks are naturally very willing and it is relatively safe.
At that time, no one knew that the Sinclair Group would be followed by the death of its founder and internal strife within the family, causing the stock price to fall sharply.
A simple calculation shows that when Sinclair Group's stock price is below $19.25, the book value of the 23.38 million shares pledged to the bank will be less than $450 million.
But for banks' risk control, they will certainly not wait until the price of their collateral is lower than the loan they issued before they can react.
When they get closer, they have already begun to ask the other party to increase collateral or return the loan.
So when Sinclair Group's stock price approached $20, the bank warned the family.
"They borrowed the money and what did they use it for? It can't just disappear."
This is what Barron is curious about. After all, if it is used for the company's operations, there is no need to mortgage the shares held by his family.
The funds raised at that time must have been needed by their family for something.
Faced with Barron’s doubts, John Smith sighed and said:
"This is what makes me angry. Now it seems that their investment was a complete failure..."
After John Smith's narration, Barron learned that the Sinclair family was actually involved in the acquisition of MGM, one of the eight major studios in Hollywood!
MGM is an old Hollywood film company founded in 1924.
In the early days of Hollywood, there were "eight major studios", namely MGM, United Artists (UA), Warner, Universal, 20th Century Fox, Paramount, Columbia (Sony) and Disney.
It can be said that during the most glorious period of MGM, it can be said that it almost single-handedly created the golden age of Hollywood movies, with both commercial and artistic harvests.
Those popular Hollywood masterpieces include "Gone with the Wind" (adjusting for inflation, this is the highest-grossing movie in film history), "The Wizard of Oz", "The Blue Bridge", "Philadelphia Story", "Ben-Hur" and so on. All produced by MGM...
In the past, MGM was even more star-studded, with Clark Gable, Vivien Leigh, Ingrid Bergman, Spencer Tracy, Robert Donat and Norma Shearer all starring in MGM. A high-tech film that won an Oscar.
According to incomplete statistics, films produced by MGM have won 170 Oscars.
This company integrates production, distribution, and cinemas, and has countless studios covering a vast area. Therefore, at one time, MGM was the symbol of Hollywood.
There was once a word to describe MGM, called "the miracle of world film history", and founder Louis Meyer was called the "King of Hollywood"!
But the good times did not last long. After World War II, the United States’ antitrust laws were promulgated, which stipulated that from now on, production companies could no longer interfere with distribution and theaters. With the rise of the television industry and the departure of founder Meyer, the situation changed, and Mi Gaomei is no longer its former glory.
In 1970, MGM was bought by American gambling tycoon Kerkorian, and it began to stop doing business.
This shrewd casino businessman was interested in the brand value of MGM and began to get involved in the real estate field. When he put the MGM and Lion logos on hotels, airplanes, and theme parks in Las Vegas, At that time, it was destined that MGM would drift away from movies, and that the roaring lion of the past would become a circus touring around the world.
It is worth mentioning that in 1981, MGM also acquired United Artists, which was founded by comedy master Chaplin. However, the combined market share of these two old companies at that time was only 6% - originally owned by United Artists. It was at this time that the copyright of Midea 007 became the IP of MGM.
This time MGM will be sold. In addition to the company's development over the years, the last straw that broke the camel's back was Pigeon Wu's "Wind Whisperer" - a single film lost 100 million , causing MGM’s accumulated debt to reach 2 billion US dollars at that time, and MGM, which could no longer survive, announced a decision in 2003 that caused an uproar in Hollywood: selling out!
So last year, Sony took the lead and united some Wall Street capital to form a consortium and established "MGM Holdings" to acquire MGM.
This acquisition was not made by Sony Business - in 1989, Sony spent US$3.4 billion to buy Columbia Pictures, one of the "Big Eight" Hollywood companies, to enter Hollywood, and later changed its name to Sony Business - but by Sony Business. Directly from Sony headquarters.
"MGM Holdings" includes a five-party consortium, in addition to Sony Corporation, there are Providence Equity Partners, Texas Pacific Capital Funds, DLJ Merchandise Bank Partners, and Sinclair Family Trust.
The difference from the original time and space is that this time it was the Sinclair family that participated in the acquisition of MGM, not Comcast of the original time and space - the parent company of Universal Pictures and the largest cable television company in the United States.
This time, their bid to acquire MGM was US$4.8 billion, which included the assumption of US$2 billion of MGM's debt, and then the five companies each contributed US$540 million - Sony needs to use MGM's film library and distribute the future MGM's movie, therefore, has an extra $100 million.
The five holdings in "MGM Holdings" are equally divided, each owning 20% of its shares.
The loan that the Sinclair family had pledged against the company's shares was used to participate in this project - their purpose was also very simple, which was to obtain part of the resources of the MGM film library so that they could handle it and broadcast it on its TV stations.
You must know that at that time, MGM's film library had 4,100 films and 10,600 TV series!
Therefore, Sony is not only responsible for the distribution of "007: Casino Royale" to be released this year, but the production company Sony Columbia has also participated in the production of the 007 series of movies for the first time. The famous logo of the Statue of Liberty, for the first time Appeared in the title sequence of the 007 movie, juxtaposed with the MGM logo...
In fact, Sony is the most profitable company in this acquisition, because in addition to participating in the production of the big IP "007" series, the most important thing is that from now on, it is time to decide the outcome of the next-generation video disc format. That is the battle between Blu-ray DVD supported by Sony and HD-DVD supported by Toshiba and Microsoft!
In the end, Sony owned MGM's 4,100 movie library, plus Sony Pictures Entertainment's own 3,500 movies, surpassing Time Warner, which had 6,500 movies, to become the world's number one.
And with these film resources, Sony can use this as ammunition to make great achievements in the DVD war. Therefore, after acquiring MGM, the first thing Sony did was to select 1,400 films from both parties' film libraries and export them as exclusive films. Blu-ray format to gain an advantage in the format war with Toshiba.
Therefore, after Sony acquired MGM, Hollywood generally believed that the acquisition plan led by Sony was not intended to produce movies.
As expected, after Sony took over MGM, it planned to close almost all of MGM's studios except for the 007 series of movies and the "Pink Panther" series of movies, which meant large-scale layoffs.
Therefore, it is no wonder that John Smith has now seen that although the family's investment cannot be said to be a complete failure - at least it has obtained the rights to play many films in the MGM library, it only stems from the investment in MGM. It is still difficult to "resurrect" this company. The 20% of the shares is now no longer worth the initial investment of 540 million US dollars. It is difficult to even say that it is even 450 million US dollars...
But Barron is even more clear. He remembers the original time and space, when the consortium headed by Sony acquired MGM in 2005, the company suffered losses of up to 2 billion US dollars...
But four years after the acquisition, in 2009, MGM's losses almost doubled to US$3.7 billion!
