HOLL: More information on settlement
It has been interesting that after HOLL put out a 8-K saying it has settled with AMC, the stock has basically not moved. The stock was at $1.50 before the settlement news, and today after close we are back to the same place. The settlement has been a huge deal and a huge value generator for HOLL. A case that was dragged on for 2 years has finally been settled. But investors couldn’t care less. Why? Because there is lack of information on the settlement. The terms haven’t been disclosed. So uncertainty is creating an interested buying opportunity, and I have been buying.
Today HOLL filed another 8-K in which it lists some more details on the settlement.
On November 10, 2013, Hollywood Media Corp. (the “Company”), MovieTickets.com, Inc. (“MovieTickets.com”), National Amusements, Inc. and AMC Entertainment Inc. (“AMC”) entered into a settlement agreement (the “Settlement Agreement”) pursuant to which the Company, MovieTickets.com and National Amusements, Inc. reached a settlement with AMC, on confidential terms and without admitting liability of one to the other, with respect to the lawsuit relating to MovieTickets.com that was initially filed in October 2011 by the Company and National Amusements Inc. against AMC. As a result of the Settlement Agreement, the Company’s equity interest in MovieTickets.com increased from approximately 26% to approximately 34%. In addition, in connection with the Settlement Agreement, AMC and MovieTickets.com entered into a non-exclusive ticketing agreement, the terms of which are also confidential.
So HOLL created more value for shareholders by moving the equity holding from 26% -> 34%. But if you watch the stock price, you won’t notice it. More importantly, the “non-exclusive ticketing agreement” is very interesting. Besides being vague, what does it mean? First of all, MT.com has been working on adding more theatres to its online website. If you search the MovieTickets.com tweets, you will see that they are working on adding more theatres. With the settlement having occurred and the “non-exclusive ticketing” agreement, I see MT.com adding more theatres from AMC properties. I have no idea how many they are adding. But I think AMC wanted this so they can still keep Fandago and please MT.com. AMC has invested lots of capital in its relationship with Fandango, so they are not going to want it to end that easily. Although MT.com does benefit by doing this non-exclusive agreement as they can now sell tickets also. Finally, MT.com will get monetary compensation from AMC. This is not mentioned in the settlement but I think this is where the confidential part of the agreement comes in. There is some more interesting pieces to this settlement that will be great value creators for shareholders.
At current prices, you are paying little for the uncertainty with the settlement. At a 33m market cap and 25m in cash, you have a 8m difference. The equity interest in MT.com just went up to 34%. Now, I don’t think HOLL is stupid to increase equity interest in MT.com unless there is value in it. So you have to believe value of HOLL has gone up from prior to settlement. Also, the non-exclusive ticketing and adding more theatres will bring in additional revenue. It also makes it an interesting buyout option. Finally, there will be monetary compensation from AMC. So put it all together and HOLL at current prices is extremely cheap. I think shareholders will see their shares appreciate in short-time, as details of the settlement become public. In the meanwhile, I’m buying more shares if they keep trading at this price level.