STX Entertainment’s plans for an IPO on the Hong Kong Stock Exchange are facing new questions given a volatile Hong Kong market and a recent string of box office misfires.
STX has helped shield itself somewhat from some of its poor performers by teaming up for co-productions, engaging in various output deals with backend bonuses and other means of mitigating risks.
But the studio which prides itself on mid-budget releases hasn’t had what would be widely considered a blockbuster outside of its two “Bad Moms” comedies.
STX Entertainment entered Hollywood in 2011 with two goals: Be a successful studio banking on the dearth of mid-budget films, while truly becoming a U.S.-China operation.
Now the studio is awaiting regulatory approval in China to be publicly listed on the Hong Kong Exchange, not an easy task for any U.S.-based company.
STX filed documents with the Hong Kong Exchange in April to take the company public, with an IPO that would provide an infusion of roughly $500 million that the company hoped would help fuel growth.
In a prospectus filed with the Hong Kong exchange and Chinese regulators, STX reported that the company has incurred losses every year since it began operations, including gross losses of $28.1 million in its 2017 fiscal year.
However, the company reported it has $100 million in cash.
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But President Donald Trump’s trade war with China, coupled with a volatile Chinese market, still makes for a rocky IPO landscape in Hong Kong.
Chinese media had suggested an IPO as early as this month, but the timing is now completely up in the air.
A rep for STX declined to comment for this story.
STX is backed by major players both in the U.S. and China, including Liberty Global, TPG, Tencent — one of the largest conglomerates in China — and Hony Capital.
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That has attracted the interest and admiration of investors like Gerber Kawasaki CEO Ross Gerber put it.
“This is a company that gets it. If I were going to start a business in Hollywood today, I can’t imagine not thinking about China. There’s going to be a Chinese IPO because this is basically a Chinese company,” Gerber said, adding that the board consists of “some heavy hitters.”
The company’s current mix of investments are roughly 40 percent from Asia, 40 from the U.S. and 20 percent from Europe. And with coproductions with Alibaba and Tencent in the pipeline, one of STX’s major plays is to be able to leverage its ties to China.
The studio is even distributing Netflix’s “The Irishman” in the country, an insider at STX told TheWrap, because the streaming giant doesn’t have distribution there.
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STX is undoubtedly in growth mode. The company has ramped up its theatrical distribution every year from two releases in 2015 to 14 next year, all with budgets ranging from $20 million to $80 million.
And the TV division has six scripted and unscripted series either in development or set up at networks, including the Nat Geo series “Valley of the Boom,” premiering this fall, and an untitled drama series at Amazon from “Crazy Rich Asians” author Kevin Kwan.
“I typically like this kind of company,” Gerber said. “You need to be able to leverage your content over multiple platforms and products.”
12 Chinese-Owned Media Companies, From Dick Clark Productions to AMC (Photos)
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AMC Theatres
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Mike Kalasnik
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Dick Clark Productions
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Voltage
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IM Global
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Adam Goodman
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