Promotions or False Promises?
Numerous lawsuits have been filed alleging that company executives from various high tech firms gave false or misleading information that painted unrealistic expectations among investors. Several famous CEO's are on the hot seat, including Amazon's Jeff Bezos, Oracle's Larry Ellison and Priceline's Jay Walker, according to recent article in E-Commerce Times. With their fortunes, both metaphorically and literally, tied to their companies' success, some feel that the CEOs may have painted rosier pictures
than reality warranted. Investors are filing the suits in droves, spurred as well by lowered stock prices.
In questioning the legitimacy of the investors' lawsuits, including many class action suits, the publication spoke to James Haggerty from PR Consulting Group. Haggerty commented, "When the money is flowing, no one worries about protecting their rights. But when things start to slow down and heat up, everyone starts looking for answers and ultimately you have disgruntled investors." He added that judges are increasingly questioning the bevy of class action suits that are in the works, especially when some
law firms already have the class action suits prepared and waiting for when stock values fall below a certain price.
Magna Closes Deal
Magna Entertainment Corp. (MEC) recently closed on its acquisition of Ladbroke Racing Corp.'s Call-A-Bet account wagering operations. Magna also gains The Meadows harness track, four off-track betting facilities and an 18.3 percent interest in The Racing Network as part of the deal. Under the arrangement Magna paid one-half of the $53 million purchase price in cash. In addition, one-quarter of the price was satisfied by the issuance of 3.1 million shares of Class A subordinate voting stock and the final quarter was
paid through the issuance of an MEC promissory note, payable in two equal installments on the first and second anniversary of the deal's closing. The cash portion of the purchase price is subject to a post closing adjustment related to the net working capital of Ladbroke Racing Corp. at closing, estimated to be about $8 million payable to MEC.
"The acquisition of the Call-A-Bet account wagering system, together with Ladbroke's other Pennsylvania horse racing operations, is an important step in MEC's strategic plan of building the premier account wagering business in the country. By acquiring the existing Call-A-Bet system, which already has
a profitable operating history, MEC will significantly advance its electronic media strategy and realize an immediate improvement in its earnings per share," commented MEC Chairman Frank Stronach.
eLOT Slashes Expenditures, Nasdaq Delistment Looms
Officials at eLOT (ELOT) announced additional expenditure cuts to reduce the company's operating cash burn rate and realign company costs with its expected achievable revenues. Several steps have been taken, including a reduction in headcount and a salary deferral program for all remaining employees. Edwin McGuinn, eLOT's president/CEO, has deferred nearly 40 percent of his salary. "We are taking the necessary steps to put the company on a more solid financial footing and continue to explore several
strategic alternatives for financing activities and operations going forward. We are also pursuing similar transactions to our recently announced Network60 acquisition that will contribute to a further reduction in the burn rate and accelerate reaching cash breakeven," McGuinn said.
In addition, the company faces Nasdaq delistment. On March 27 a staff determination was sent to eLOT by Nasdaq officials warning that the company has failed to comply with the $1 minimum bid price requirement for continued listing on the exchange. eLOT officials have asked for a hearing regarding the potential delistment, although no date has been set
yet.
Preview of Quarterly Revenues, Profits Released by MDI
Good news is ahead according to officials at MDI Entertainment (LTRY). The company announced that it expects record revenue and profits for the first quarter of its new fiscal year, which ended March 31. Revenues for this quarter alone exceed the $2.8 million MDI recorded during the previous seven-month stub period ending Dec. 31.
"This quarter marks MDI's return to substantial profitability," said MDI President/CEO Steve Saferin. "Since last summer, management has worked diligently on growing our core business and the results we expect from the first quarter demonstrates we are beginning to show results from that work."
He added, "But it is only the beginning. The strength of our brands, our relationships with our customers and the success of our games have helped us build a substantial backlog of business that should result in record revenue and profits for the entire fiscal year. In addition, the combination of our expected first quarter profits and the voluntary conversion by our strategic partner, Scientific Games, of subordinated debt to equity, as well as other transactions, will improve our balance sheet by over $1.2 million."
Financial Statements