You have to admire the buoyancy of SeaWorld Entertainment (SEAS +1.64%) stock. Shares of the theme park operator took an intraday hit a couple of hours into Tuesday's trading session, after Bloomberg reported that the Securities and Exchange Commission was suing the company and its former CEO for failing to disclose the negative impact that the Blackfish documentary would have on investors around the time of its 2013 IPO. The stock would go on to briefly dip below $30 for the first time in nearly two weeks, but the shares managed to claw their way back to a marginally positive close.
It obviously helped that news that the case had been settled broke shortly after the initial story. SeaWorld Entertainment will pay a $4 million penalty and former CEO Jim Atchison is on the hook for $1 million. Neither party needs to admit or deny the allegations. It's small potatoes for SeaWorld, as it rakes in roughly $4 million in revenue across its parks in an average day. It's a small price to pay to have one less gray cloud hanging overhead, especially now when so many things are finally starting to go right. SeaWorld stock is one of this year's biggest winners, up 130% so far in 2018.
Image source: SeaWorld San Antonio.
Making a big splash
It may not seem fair to place the burden of assessing a documentary's impact on future attendance levels on the parent company of the three marine life-themed namesake attractions. It was clear to anyone streaming Blackfish that it was a one-sided takedown of SeaWorld and smaller parks with killer whales in captivity, but can you blame a company for trying to accentuate the positive? Drawing more attention to Blackfish would've hurt its recovery efforts, though some SeaWorld fans will argue that the park operator could've been more successful if it had attacked activist groups and the Blackfish talking points more aggressively early on.
Settling with the SEC helps distance the company from an episode that marred its early beginnings as a public company, but it's really just a technicality. Most of the SeaWorld executives from five years ago are long gone. It's already on its second CEO since Atchison left more than three years ago.
The timing of the settlement is sweet. Revenue is finally growing after four years of declines. SeaWorld's top line has climbed nearly 9% through first half of 2018, as improving attendance and spending trends drive the growth that has been so elusive in the previous years. The comparisons will only get better at this point in light of the hurricanes that hit Florida and Texas during the third quarter of last year.
SeaWorld is paying a reasonable $4 million to put one matter to rest. It sleeps with the fishes now. It's a small price to pay for a company where bullish momentum has seen its market cap expand by $1.5 billion in value this year.
