As is often the case a newsletter promotes a small company and out of nowhere that company hits volume heights previously never seen and their share price shoots north. Such is the scenario with Writers’ Group Film Corp. (OTCQB: WRIT) which went from a company whose 50-day trading volume average is slightly higher than 3.28 million shares to surpassing the 70 million mark by noon on Monday and their share price climbed more than 100% to 0.080 after closing on Friday at 0.036.
Of course that’s not to say WRIT has come anywhere close to their all-time high of 0.30 which was reached last month, actually the day before they announced their acquisition of Front Row Networks, Inc., a Los Angeles-based live concert production and distribution company which produces live concerts in 3-D for initial digital broadcast into movie theaters in North America.
The question now is whether or not there is any substance to what WRIT is doing or is Monday’s activity simply based on the promotion of a third party. WRIT did release a piece of news concerning the appointment of John Diaz as President and Director of the Company, and its wholly owned subsidiary Front Row Networks, but it’s hard to see how this piece of information would warrant trading volume of such magnitude, especially because it’s not exactly breaking news.
WRIT is being billed as a growth company concentrating on the entertainment industry, specifically producing live concerts by top recording artists in 3D for initial digital broadcast into movie theaters in the U.S., with a wider rollout anticipated in Western Europe, South America, Asia, and North America. As part of their business model following the initial theatrical run the 3D concerts will be licensed to TV broadcasters and DVD retailers as well as sell merchandising and sponsorship, specific to each artist in the concert, in theaters where the live concert will be exhibited.
Essentially what WRIT aims to do is take a live performance from a top artist like Lady Gaga and stream that performance to 3D screens in movie theaters across the world. Following the theatrical run the company would gain further revenue off the licensing deals they strike with broadcasters and DVD retailers, etc.
Given the rise in popularity and profitability of 3D in movie production this avenue appears to be something that could grow legs. What should be of question to investors is WRIT’s Feb. Quarterly Report which raises some serious doubts about their ability to be a major player in the market. For one, under Financial Condition, the company revealed “The amount of cash we currently have on hand, as of December 31, 2010, is $59,” that might not even be enough to get a ticket to watch one of their own productions.
Outside of the 3D ventures WRIT is also putting energy into pitching their pilot script for the 30 minute comedy series “Flagged” to various networks, produce the film “Writers’ Assistants,” as well as finish developing their web strategy which could include the production of a web-based serial and/or production of short vignettes and skits for use solely as a marketing and branding tool. Needless to say none of these ventures have been taking off.
Judging by what WRIT forecasts it is easy to see why this has been the case, in the 10Q they say “We do not anticipate any significant changes in the number of employees. We currently have zero and anticipate having zero employees in the next 12 months.”
In order for WRIT to actually become a player in the market they are targeting they will need a substantial amount of money and with no real revenue stream to date they will need to rely on registered offerings or private placements which will obviously dilute any shares that currently exist.
There have been suggestions that WRIT could partner with a company like Live Nation, an industry leader in a live concert promotions, to get their 3D plan off the ground. While a partnership like this could be a spark for WRIT such a deal wouldn’t be overly advantageous for the company as their financial situation is well know and it’s unlikely that any deal would generate an extremely favorable business scenario for WRIT.
What WRIT does having going for them is a relatively low share price that could attract those willing to take a risk. There is little doubt that 3D is capturing more of the entertainment industry which includes not only movie production but television as well. With that trend continuing there will obviously be a demand for content and if WRIT is able to position themselves as a 3D content provider of top musical artists then their shareholders could benefit.