Please ensure Javascript is enabled for purposes of website accessibility

Why Genius Brands Stock Is Crashing Hard Thursday

By Jason Hall – Updated Jun 5, 2020 at 8:29AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A group of investors is cashing in on its recent massive bull run.

What happened?

Shares of Genius Brands International (GNUS 0.60%) are falling on Thursday. As of 12:38 p.m. EDT today, the stock is down 19.6%, ending a run that's seen the kids' entertainment company gain almost 2,000% in value, including a massive single-day surge of 89% on Wednesday

The sharp reversal is a result of a Securities and Exchange Commission filing disclosing that a group of investors registered to sell as many as 60.1 million shares of Genius Brands stock. 

So what

In short, the sellers are looking to cash in on their investments in the company, largely over the past year, that have kept it afloat. A large portion of the shares registered to be sold, 29 million, will come from warrants that the investors can convert to common shares at an exercise price of only $0.21 per share.

Rainbow Rangers characters.

Rainbow Rangers characters. Image source: Genius Brands.

It's interesting to note that CEO Andy Heyward participated in the warrants, investing $1 million of his personal cash, but is not listed as one of the selling shareholders. 

Now what

After the massive run-up in price, it's not surprising that some of these investors are looking to cash in, even with the company's future far more secure now than it was only a few months ago. Management is putting that cash to work in new properties including the popular Rainbow Rangers and its upcoming streaming service, the Kartoon Channel. It also has a new line of Rainbow Rangers toys being made by Mattel debuting soon at Walmart

It's a little early to tell how sustainable the recent run will prove, but if the upstart media company is able to monetize these new properties effectively, its future could remain bright. Today's selling by some insiders and large investors doesn't really change those prospects one way or the other. But with that said, it's probably a good idea at this point to give the company some more time to deliver results. It's still spending cash as quickly as it gets it (and then some), so there's still a lot of risk. 

If its latest big hits can reverse that trend, the future could be really bright, but it's going to take a few more quarters before we see the benefits on the bottom line. 

Jason Hall has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Genius Brands International Stock Quote
Genius Brands International
$0.69 (0.60%) $0.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.