Shrek 3: The Wall Street Years

Hollywood has a new star this morning. But you won't find this star on the Walk of Fame. Instead, you'll have to head 3,000 miles east to Wall Street, where the much-anticipated IPO from DreamWorks Animation SKG Inc. is having its debut.

Spun off from the mega-studio DreamWorks SKG of Hollywood power brokers Steven Spielberg, Jeffrey Katzenberg and David Geffen, the IPO might give a boost to publicly traded tech firms in general and is yet another validation for the already-obvious success of computer-animated films.

DreamWorks Animation's hit parade includes its "Shrek" film franchise and the newly released "Shark Tales," which finished the past weekend at No. 2 in box office sales.

The company is getting a warm reception from Wall Street, with its 29 million shares pricing last night at $28 each, higher than the expected range of $23 to $25, raising about $812 million. Shares will trade under the "DWA" ticker symbol.

"The sale is the biggest initial public offering to emerge from Hollywood since MGM went public seven years ago and raised $180 million," the New York Times noted. The Associated Press said "analysts forecast strong performance for the company in the near term. The IPO also benefited from its proximity to the opening of 'The Incredibles,' the latest computer-animated film from its chief rival, Pixar Animation Studios." DreamWorks Animation "also faces considerable competition from Pixar and other companies, including The Walt Disney Co. and Twentieth Century Fox, which are making computer-animated features." Pixar, of course, is run by Apple CEO Steve Jobs...
• The New York Times: DreamWorks Animation Raises $812M (Registration required)
• The Associated Press via washingtonpost.com: Dreamworks Animation Seeks Splashy Debut

The Los Angeles Times gave a preview of how DreamWorks Animation shares are expected to perform today: "Investors who couldn't get in on the initial offering may scramble to buy shares once they trade on the open market. In the near term, DreamWorks Animation looks to put up numbers that will please investors. Next week, it is expected to reap big sales from the release of the 'Shrek 2' DVD. The DVD of 'Shark Tale' will hit stores early next year." The Hollywood Reporter noted: "Expectations for the stock's performance had observers invoking the name of Google, which saw its stock more than double within a few weeks of trading despite a good deal of skepticism on Wall Street. The buzz around DreamWorks has been fueled by several factors, including the success of 'Shark Tale' and investors' desire to get in on the ground floor of a high-profile IPO toward the close of a dreary year overall for media investors."
• The Los Angeles Times: DreamWorks IPO Draws $812 Million (Registration required)
• The Hollywood Reporter: DreamWorks Drawing Up IPO

DreamWorks owners, including Katzenberg, Geffen, Spielberg and "Microsoft co-founder Paul Allen and Microsoft itself, are the biggest winners and stand to make millions. Shares held by Katzenberg, Geffen and Spielberg were worth $190 million each at the IPO price. Allen's stake is worth $1 billion," USA Today reported. The Wall Street Journal noted that "Mr. Katzenberg and Mr. Geffen will retain voting control of the company after the offering. While the founders aren't selling any of their shares yet, billionaire Paul Allen, an early backer of the business, is raising more than $60 million by selling part of his stake in the offering."

More from USA Today: "Perhaps the biggest stroke of genius, or luck, is the timing of the IPO, says Tom Taulli of IPO tracker CurrentOfferings.com. 'They timed it perfectly,' he says. For starters, the company priced the IPO just as the stock market is coming off back-to-back surges, a rare event recently. Shares of the No. 1 rival in computer-animated entertainment, Pixar, are up 15% despite a weak market. That Wall Street success rubs off on this IPO, says Linda Killian, portfolio manager at Renaissance Capital. She adds DreamWorks plans two movies a year, double the one Pixar puts out," USA Today reported.
• USA Today: DreamWorks Animation Sets IPO At $28
• The Wall Street Journal: DreamWorks Sets IPO at $28 Each Ahead of Debut (Subscription required)

"What, me worry?" says Pixar Chief Steve Jobs...

Other media outlets also noted that the success of the DreamWorks Animation IPO has a lot to do with rival Pixar's strengths. "Analysts and investors said that there was huge investor interest in the shares, not just because of 'Shrek 2' and 'Shark Tale' but because of the huge success of Pixar, the leading computer graphics animation company," the New York Times said, going on to quote Brad Ruderman of Ruderman Capital in Beverly Hills, who told the newspaper: "One thing is certain, that Pixar has proven its doubters wrong. People said there was no consistency to their business, but those who bet against it have failed miserably. This is riding the coattails of that."

Bloomberg compared how the two companies stand in the public market, asserting that Dreamworks has a lot of catching up to do. "DreamWorks Animation's market value is $2.96 billion. Rival animated film company Pixar Animation Studios has a market value of $4.5 billion and its stock has gained 15% this year. DreamWorks said it can put out two computer-generated animation movies a year. Its next computer-animated film will be 'Madagascar,' to be released in spring of 2005. The next 12 movies after 'Shark Tale' will be distributed through DreamWorks Studios." For the record, Pixar's next movie, "The Incredibles" is highly anticipated and hits the theaters on Nov. 5.
• Bloomberg via The New York Daily News: DreamWorks Initial Offering Pulls In 812M