Please ensure Javascript is enabled for purposes of website accessibility

Why Genius Brands Stock Was Sliding Today

By Jeremy Bowman - Mar 30, 2021 at 1:23PM

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

Investors were disappointed by a new partnership announcement from the children's entertainment company.

What happened

Shares of Genius Brands (GNUS 6.68%) were tumbling Tuesday after an announcement about a new partnership with Marvel didn't live up to investor expectations.

As of 1:10 p.m. EDT, shares of the children's entertainment company were trading down by about 21%.

A scene from Superhero Kindergarten

A still from Superhero Kindergarten. Image source: Genius Brands.

So what

In its press release Tuesday morning, Genius Brands said that it had entered into an agreement with Marvel Studios, which is owned by Disney, in which Marvel will license from Genius Brands certain likeness rights of Stan Lee, the creator of many of Marvel's best-known characters.

It's the first such collaboration between the two companies, and Genius said the companies are discussing other ways to work on Stan Lee-related content in the future. Through a joint venture with POW! Entertainment, Genius Brands controls Stan Lee's likeness, signature, and similar assets, as well as content and brands he created after leaving Marvel. It's unclear how much Genius Brands will get paid in the deal.

In and of itself, the announcement is a step in the right direction for a company looking to monetize its intellectual property, but investors sold the stock because they had expected bigger news after CEO Andy Hayward teased the partnership multiple times. 

In a November letter to shareholders, Hayward wrote (bold is his), "I am authorized to share today that we are now working with Marvel Studios on an important Stan Lee initiative which we will be announcing shortly. Like everything that Stan Lee ever touched, I can assure all our shareholders it will be significant, and the announcement will be worth the wait."

He also updated investors in early March to say that the announcement would come by the end of March, leading to speculation on Twitter that the stock could reach $5 a share on the news.

Instead, the opposite proved to be true, and shares were trading near $2 Tuesday morning. 

Now what

This is far from the first time Hayward has teased investors with hints about pending news only to end up disappointing them. Announcements about a partnership with Arnold Schwarzenegger and even rumors about a full-on acquisition by Disney haven't lived up to expectations.

While Genius Brands has taken meaningful steps to acquire intellectual property, the company has yet to find ways to monetize it. It brought in only about $1 million in revenue through the first three quarters of 2020. As a result, Genius Brands still trades in the penny stock range, and the repeated pumping of the stock by Hayward seems like a good reason to stay away.

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, Inc. Stock Quote
Genius Brands International, Inc.
$0.63 (6.68%) $0.04
The Walt Disney Company Stock Quote
The Walt Disney Company
$105.18 (-2.00%) $-2.15
Twitter, Inc. Stock Quote
Twitter, Inc.
$37.39 (-8.18%) $-3.33

*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 service.

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 05/17/2022.

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.