Hollywood SPAC's vision is build on a strong belief that the production and distribution of media content will be permanently changed by the impact of technology and environment on human behavior and habits.
The Major Hollywood Studios need to consolidate.
The production and distribution of media content will be permanently changed by the impact of technology and environment on human behavior and habits.
Why a Hollywood SPAC ?
Vision : Hollywood SPAC is sponsored by Swiss Financiers on the distinctive belief that the whole of Hollywood’s business environment and more specifically the major studios must restructure and find immediate fresh funding. The Hollywood SPAC has the ambition of becoming the driving force of a much need overall of the entire Hollywood film industry crippled by its heavy debt burdens, the erosion of their market share and the catastrophic effects of the COVID 19 Pandemic.
The current Pandemic and ensuing economic crisis has led to a crystallization of issues faced by the film industry decoupled by the inevitable and accelerating economic slowdown. As interest rates start to rise, the wrong footed studios with their mountains of debt, that has significantly increased during the last decade, are in grave and imminent danger. Furthermore and more insidiously the streamers have increasingly become rivals to the establishment through their build-out and ownership of copyright / audio-visual content, which has further eroded the trade’s profitability. The sharp drop and shift in revenues has accentuated the need to rationalize and consolidate or face dramatic issues. The Hollywood SPAC anticipates that studios will no longer be able to allocate all the needed capital to the future of the movie profession. Small to medium-sized budget movies are the main concern as the share of films that generate under $100 million at the box office has fallen from 52% in 2010 to 39% in 2019 and this trend is expected to accelerate further. In other terms, mid-budget, non-tentpoles projects will no longer be worth the cost and risk.
The broader adoption of streaming services that will offer their own selections of original film choices, the slowing theatre upgrade cycles due to the need to repair balance sheets and the fact that many theatres are connected to zombie malls will hurt film attendance and shrink the number of screens in the industry.
As a result prices will need to be raised, and as we have seen in other industries, that is typically the worst thing to do when demand weakens.
Mission : To become the main consolidating force in an industry ripe for change and restructuring. Providing the studio industry with a novel access to financing through an activist player looking to integrate and streamline Hollywood’s movie business. The Hollywood SPAC will help bring about change in an industry already going through major disruption, taking advantage of bringing fresh and dedicated capital to a distressed sector looking for strong leadership and new directions. With its approach the Hollywood SPAC will look to offset revenues lost by injecting new capital to the studios and providing funding to support ailing production budgets.
The SPAC Structure : A SPAC is a special purpose acquisition company formed in order to raise funds from investors through an initial public offering for the purpose of acquiring a private company. In the late 80s brokers were manipulating with penny stocks, which price trades below $5 per share, particularly with blank check penny stocks. The environment created by stock manipulation required certain actions, in response to financial fraud, Rule 419 was created conducive to protect investors. The emergence of this rule made it difficult to legitimize the blank check issuer, the simple solution was to form companies with a bigger share price to avoid Rule 419, however there was a high risk that new rules may arise in response to a rule circumvention in this way.
SPACs were the result of creation non-penny stock blank check companies, which are protected by Rule 419 in order to safeguard investors money. SPAC is a modern variation of the «blank check» company, which puts most of its money in trust, rest is used for financing the search for a target company to acquire. While it is true that in the 1980s these companies were often used to defraud inexperienced investors, today’s SPAC is a post-regulation tool with many security features built in. Its key investors are some of the most proficient-hedge funds, which is one of the reasons why SPAC has reputations of being trustworthy.
Actually it was elaborated (designed) in 1992 by the team of lawyers and underwriters, but didn’t find sufficient popularity due to market conditions: during this time it was uncomplicated for small companies to gain money through traditional IPO. Only in 2003 SPAC began to become in demand. By 2004 there were 12 issues of the total amount of $0.44 billion, the following year number of issues had increased more than twice and was 29 of amount $2.06 billion. From this point until now popularity of SPAC is only increasing.