SEC probes DreamWorks ‘Turbo’ writedown

"Turbo" may have been about the world's fastest snail, but the studio behind it couldn't have been slower about taking a writedown on the animated feature.

The delay now has the studio, DreamWorks Animation SKG, in the crosshairs of the Securities and Exchange Commission and a handful of law firms seeking lead attorney status in a class action against the film factory.

Investors, meanwhile, have already been punished twice.

On Feb. 25, when DreamWorks finally announced a $13.5 million writedown on a film released seven months earlier, the market reacted by sending its stock down 12 percent.

And on July 29, when the studio disclosed the same writedown had prompted an SEC investigation, the market shaved its shares another 12 percent.

DreamWorks CEO Jeffrey KatzenbergPhoto: WireImage

For Jeffrey Katzenberg, the studio's co-founder and CEO, the probe and class-action interest could prove especially tough to shake.

He sold more than $1.24 million of his company's stock on two separate occasions in October and November, SEC filings show.

The first batch commanded $27.84 per share, the second $32.17. And don't think it's lost on class-action seekers that both prices look good in comparison to the $20 or so that a DreamWorks share fetches today.

Katzenberg's sales were well-timed, coming three and four months after the release of "Turbo," yet three and four months before the film's writedown.

The studio wouldn't say whether the sales were due to estate planning or some other prearranged deal.

In the past, DreamWorks has been quicker to write down a box-office bomb.

The most recent was for "Mr. Peabody and Sherman," which opened in March and received a $57 million writedown in April. "Rise of the Guardians," released in November 2012, got an $87 million write-off in February 2013.

The elapsed time before these two films incurred their impairment charges — two months in one case, three in the other — may seem swift compared to "Turbo's" seven months. But it's not so swift by industry standards in general.

Consider that Disney's epic bomb, "John Carter," opened on March 9, 2012, and took a $200 million writedown just 10 days later.

This isn't the first time Katzenberg has brushed against the SEC.

In 2005, when still getting his legs as the CEO of a company that had gone public only months earlier, he had to tone down overly rosy projections two times in as many months.

The snafu forced DreamWorks to cancel a secondary stock offering, attracted six class-action suits and triggered an SEC investigation.

"The market has really never gained faith in him," said a former studio head.

"How complicated can DreamWorks Animation's financials be? They make two films a year and have a very small library. I am shocked they have issues around controls and accounting."

DreamWorks didn't respond to requests for comment by presstime.

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