The Weinstein Company’s Doubtful Future: Bankruptcy or Sale

“The Weinstein Company is not exploring a sale or shutting down”, says Bob Weinstein. And it is said that The Weinstein Company, as the distributor, was quite optimistic about the release of Paddington 2 given the great performance of its predecessor. However, with the producers trying to keep Paddington 2 away from the impacts of The Weinstein Company and the fact that The Weinstein Company is in need of cash urgently, Warner Bros took over the distribution. The cash that The Weinstein Company got from this distribution rights sale gave it some time to take a breath before it finally reaches the verge of bankruptcy. Nonetheless, the future of this academy awards winning Indie Company is not promising.
If you ever pay attention to the Hollywood news recently, The Weinstein Company will not sound like a stranger to you. Behind it are the co-founders, notorious Harvey Weinstein and his younger brother Bob. The company is considering selling itself for a capital infusion, just when Harvey Weinstein’s scandals hit headlines all over the world. Harvey Weinstein’s sexual allegations spanned decades, over continents. Apparently, should a thorough internal investigation be conducted, it will be costly. The whole incident itself could drag the company down terribly, let
alone the costs associated with it. It is reported that the settlement fees will range somewhere between $20 million and $40 million. So why has The Weinstein Company picked the worst timing, knowing that a sale now would not benefit themselves, if not undermine their interests at all?

Although The Weinstein Company still have some projects ready in hands, in the long run, its potential for growth doesn’t seem attractive. The Weinstein Company has already found it difficult competing with companies like Amazon and Netflix that invested heavily in films and video contents. Besides, the field of independent movies production is increasingly crowded. Notwithstanding the fact that Harvey was kicked out of the company, he still manages to hold 23% of the equity in the company. With its reputation already damaged, it’s only harder for The

Weinstein Company to survive in this talent and relationship driven business and attract talents afterwards. It doesn’t seem realistic to expect The Weinstein Company to recover from this big strike like a rising phoenix and realize lucrative gains in a sale. And the sale will most likely be an asset based one, taking account of its work in progress inventory, long-term contracts, etc. Actually, Colony Capital expressed its interest and reached out to The Weinstein Company but only found out the assets were not as valuable as they thought. Ironically, after Weinstein brothers sold Miramax which was the first company they founded to Disney and wanted it back so desperately, it was Colony Capital that outbid them. But years later, Colony could have been their saviour.
The Weinstein Company has been experiencing financial difficulties even before the scandals and this is in fact not the first time they have ever considered a sale or divestment, which can also explain why it needs cash infusion right now. However, given the current situation, raising money could be quite expensive and it is highly likely that they cannot attract high-profile projects in the near future. While The Weinstein Company was still a well-known brand, it tried to sell its TV division worth between $400 million and $500 million for up to $950 million, which obviously,
was not materialized in the end. But still, a decent price based on assets for a deal can be projected provided that The Weinstein Company remains in the industry over a decade and is associated with titles like “The King’s Speech”, “Django Unchained”, “The Artist”, and “Project Runway”. However, those assets are heavily leveraged and borrowed against many times. In2010, The Weinstein Company finalized a $450 million debt restructuring with Assured Guaranty Ltd. And, Goldman Sachs, and the latter sold it to AMC Networks later. The rights to hundreds of movies and its archives will be reverted to The Weinstein Company only after it pays off the debt, which means The Weinstein Company cannot rely on cash flows from these films being replayed like other studios.
What’s worse, on November, AI International Holdings, part of investor Len Blavatnik’s empire, filed a lawsuit, claiming that The Weinstein Company had defaulted on a $45 million loan which in the end, Harvey Weinstein signed a guarantee for. It entitled Len Blavatnik to go after Harvey’ personal assets. 4 Under investigation into the sexual harassment, it may take time for The Weinstein Company to find another potential bidder. The problems are, will the buyers proceed knowing that Harvey Weinstein still holds certain shares of the company. Is Harvey Weinstein willing to give up his equity at this point? On the other hand, he surely wants the company to get through this life or death period smoothly. But knowing he is the detriment of the company, he could be faced with a tough dilemma right now.
Article by: Yeting Huan