Many of our readers and subscribers have been reaching out to us here at Insider Financial asking – what’s happening with GNUS stock? The answer is simple – GNUS stock has been the victim of relentless short selling. The bears have done a well-coordinated short and distort campaign on Genius Brands.
The result has been a collapse in the share price from $11 to just under $2 a share. Half of the float has been shorted and so far the bears are winning the battle. However, the war is far from over and the current moves being made by CEO Andy Heyward make the company an ideal takeover target.
About GNUS Stock
First up, here’s a little background info for those that aren’t familiar with GNUS stock. Genius Brands International is a leading global kids media company developing, producing, marketing, and licensing branded children’s entertainment properties and consumer products for media and retail distribution.
The Company’s award-winning ‘content with a purpose’ portfolio includes the upcoming Stan Lee’s Superhero Kindergarten, starring Arnold Schwarzenegger and in partnership with Alibaba; Rainbow Rangers for Nick Jr.; Llama Llama, starring Jennifer Garner, for Netflix; award-winning toddler brand Baby Genius; adventure comedy STEM series Thomas Edison’s Secret Lab; and entrepreneurship series Warren Buffett’s Secret Millionaires Club.
Through licensing agreements with leading partners, characters from Genius Brands’ IP also appear on a wide range of consumer products for the worldwide retail marketplace. The Company’s new Kartoon Channel! is available in over 100 million U.S. television households via a broad range of distribution platforms, including Comcast, Cox, DISH, Amazon Prime, Sling TV, Apple TV, Roku, Amazon Fire, and more. For additional information, please visit www.gnusbrands.com.
Kartoon Channel! iOS App
The Kartoon Channel! app is now live for iPhone, iPad, and Apple TV. The app already has a 5-star rating and a number of positive reviews.
In less than 24 hours, the app is already number 84 in entertainment, just 4 spots behind DisneyNOW.
For kids, the app is already number 8!
GNUS Stock Huge Growth Potential
What many traders and investors missed on GNUS stock was the update the company put out in April. In this update, the company forecast:
- For 2019, we expect $9.6 million in gross revenue, given that licensed products will begin to come to market in the second half of the year with many more being introduced in 2020.
- For 2020, we expect $50 million in gross revenue.
- For 2021, we expect $247 million in gross revenue.
Netted from royalties to wholesale revenues these become:
- $6.4 million for 2019
- $8.1 million for 2020
- $16.3 million for 2021.
This represents an annual percentage growth of 546% in 2019, 27% in 2020, and 101% in 2021, as both engines of Rainbow Rangers and Llama Llama hit their stride.
The biggest name jumping on the Genius Brands stock train is Arnold Schwarzenegger. Arnold is now a significant investor in Genius Brands stock after electing to receive warrants to purchase shares of the Company’s common stock as an advance against his profit participation in the new animated children’s series, Stan Lee’s Superhero Kindergarten.
On June 12, 2020, Genius Brands International, Inc., a Nevada corporation (the “Company”), issued to Oak Productions, Inc. a warrant (the “Schwarzenegger Warrant”) to purchase 2,158,273 shares of the Company’s common stock at an exercise price equal to $1.39 per share (the “Exercise Price”). The Schwarzenegger Warrant will be a non-refundable recoupable advance on Mr. Schwarzenegger’s one-third (1/3) participation in the animated television series currently entitled “Stan Lee’s Superhero Kindergarten” (the “Show”). MSA Advisors, LLC (“MSA”) will also receive a warrant (the “MSA Warrant” and, together with the Schwarzenegger Warrant, the “Warrants”) to purchase 125,899 shares of the Company’s common stock at the Exercise Price as compensation for MSA’s role as an advisor to the Show.
Created by Stan Lee as one of his final projects, Stan Lee’s Superhero Kindergarten, which will premiere in 2021 on Amazon Prime in the U.S., is co-produced by Genius Brands with China’s Alibaba Group, Lee’s POW! Entertainment, and Schwarzenegger’s Oak Productions. Schwarzenegger, who also serves as executive producer, lends his voice as the lead character in the series.
It’s important for Genius Brands’ shareholders to realize the effect Schwarzenegger could have on the company. If anyone doubts star power, look at what Oprah Winfrey has been able to do for Weight Watchers’ parent WW International. Arnold’s warrants are at $1.39 per share. He’s in GNUS stock to make money. He could have taken cash but chose GNUS stock instead. Obviously, Arnold sees huge potential in GNUS stock over the long run.
GNUS Stock Dilution
No conversation about GNUS stock can be complete without discussing dilution. This is what the bears keep harping about like a broken record. The fact is no company would exist today without dilution – Disney, Netflix, Apple, Amazon, etc. Companies issue stock to raise money.
In May and June, the company disclosed a registered direct offering of 20 million shares at a price of $1.50 to raise $30 million. That came less than two weeks after the company announced a registered direct offering of 7.5 million shares at $1.20 to raise $9 million. Genius Brands now has $55 million in cash on its balance sheet. CEO Andy Heyward addressed this in Friday’s press release:
Normally, people associate the issuance of shares with dilution, however when the dilution is accretive, the benefit to the company is exceeded by the acquisition of the asset and is greater than the dilutive effect. That is the primary purpose of having these new shares available. I speak not only as your Chairman and CEO but as one of the largest shareholders in the company. My interests are fully aligned with those of our shareholders of common stock.
He further added:
One only needs to look at The Walt Disney Company’s playbook, to see the value changing transformation of important assets….all acquired through issuance of new stock – Pixar, LucasFilms/StarWars, and Marvel Entertainment.
Genius Brands is gearing up for the August retail launch at Walmart for the Rainbow Rangers’ toy line from Mattel, along with hundreds of other product SKUs coming to retail over the next 12 months. The toys will feature characters—Rosie Redd, Mandarin Orange, Anna Banana, Pepper Mintz, Bonnie Blueberry, Indigo Allfruit, Lavender LaViolette, and Floof—from the popular Rainbow Rangers series, currently airing on Nick Jr. in the U.S. and key territories around the world.
Additional Rainbow Rangers branded products at retail include two DVDs from Distribution Solutions available at Walmart and Target stores nationwide, as well as online at Amazon; costumes and accessories at online retailers, including Walmart, Amazon, Party City, and halloweencostumes.com; apparel from Bentex on Amazon; storybooks from Macmillan Publishing at Target.com, Walmart.com, and Barnes & Noble; bicycles from Dynacraft at Walmart.com and Kohl’s.com; and stationery items from Inkology on Amazon.
While the current share price is indeed disappointing, those with a long-term time horizon can be confident that the company is making all the right moves. The shorts are able to impact GNUS stock in the short-run, but they can’t stop the moves CEO Andy Heyward is making. Each new day brings a new deal and this increases the underlying value of GNUS stock.
As we said before, we believe CEO Andy Heyward is setting the company up to be bought out. In our opinion, it’s not a matter of if a Netflix or Disney will buy Genius Brands, but when.
As always, good luck to all (except the shorts)!
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Disclosure: We have no position in NASDAQ:GNUS or any of the securities mentioned. We wrote this article ourselves and it expresses our own opinions. We are not receiving compensation for it. We have no business relationship with any company whose stock is mentioned in this article.