Yesterday, IMAX (NASDAQ:IMAX) -- you know, the company behind those gargantuan movie screens -- saw its stock soar 11% higher on more than three times its usual volume. Yesterday happened to be the first day that IMAX traded more than a million shares since its latest debacle four weeks ago, when the stock was rocked after a dreadful third-quarter showing.
IMAX has been on the bidding block since March, so was yesterday's surge a prelude to a suitor's kiss? Let's be realistic here. Big swings on high volume can strike up that kind of rumor mill, though if the buyout were true, one would think that a company would halt its shares, because obviously the news was leaking and some folks were trading on inside information.
The next few days will tell the tale, of course. IMAX could certainly use a new owner. Its balance sheet is too bloated. Its new installations are too lumpy. Its leadership is questionable at best.
In a nutshell, this once-profitable and growing company has slipped into the red, and Wall Street doesn't see a profit until 2008. That would certainly lead any potential bidders to feel that they can take the time and snag IMAX at an even cheaper price after another debacle or two, but it's hard to imagine a quarter much worse than the most recent one, which featured no new system installations. Still, deals for new screens continue to get signed, and the company's slate of 2007 theatrical releases is more inspiring than its 2006 offerings.
Who may want to own IMAX? The second round of buyout offers was supposedly made up of four different entities: two private equity firms, Sony (NYSE:SNE), and a South Korean movie theater chain. Sony always seemed like an odd participant in the bidding process, because IMAX has leaned toward showcasing Time Warner (NYSE:TWX) flicks, but maybe that was part of the plan. Just as Happy Feet wouldn't have topped Casino Royale during its opening with without the help of IMAX, Sony may see IMAX as a way to make its own features stand out more. Franchised theater owners may not appreciate that, even though Sony will be delivering the can't-miss Spider-Man 3 to IMAX screens come May.
Now that the price has gotten cheaper, the company is likely to find even more private equity firms looking over the books. There is a real opportunity to make something special out of IMAX. It just needs the right stage -- and the right stagehands -- to see it through.
IMAX was recommended last summer to Motley Fool Rule Breakers newsletter subscribers. And no, it hasn't gone well, thank you very much. But you can read the original recommendation and get access to all of the growth stock picks (which are collectively beating the market by 9%) with a free trial subscription. Time Warner is a Stock Advisor pick.
Longtime Fool contributor Rick Munarriz loves to spot great things early; that's why he's been with The Motley Fool since 1995. He does not own shares in any of the companies in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy .
