A special effects studio founded by “Avatar” director James Cameron is in serious trouble after a sudden resignation of its chief executive officer and cutbacks that have closed its newest location in Florida.
Digital Domain shares closed Monday at just over 55 cents a share on the New York Stock Exchange, just a fraction of the $9 a share the company was trading at last May. The stock has been in a total freefall since Aug. 24 when shares plummeted from $3.75.
But what happened to this company that just a few years ago had major locations around the county vying for a studio location, offering enticements like tax breaks? Apparently, it all starts at the top, and its chief executive officer, John Textor.
Textor, who runs the investment group that bought Digital Domain in 2006, resigned “effective immediately” late last week, according to Deadline.com.
“I am in profound disagreement with the decision to close our animation and visual effects studio in the wonderful community of Port St. Lucie, Fla.,” Textor wrote to the board, according to documents filed with the U.S. Securities and Exchange Commission. “The people of Florida welcomed us with open arms, and we certainly owed them greater consideration. We were able to hire and train local residents and have them mentored by the very best of our industry. I am deeply saddened and heartbroken by this decision.”
Problems with Digital Domain started to crop up last spring when the company reported losses of $140.7 million in 2011, compared to a $42.5 million loss the year before. That was after picking up nearly $3 million in incentives from local and state government agencies in Florida and Port St. Lucie to convince Digital Domain to open a facility there.
Textor blamed the bumps in the road on the cost to take the company public. But at the same time, Textor proposed a controversial plan that would encourage students to pay Digital Domain $30,000 in tuition, and in exchange, have them work for free gaining on-the-job experience with the company’s paying gigs.
That announcement drew the ire of many who already work in the special effects industry, saying that convincing people to pay to work would only devalue the work these professionals already do.
In the first six months of 2012, Digital Domain grew its revenue from $60.9 million in 2011 to $64.1 million this year. At the same time, the company was able to reduce its losses from $111 million a year ago, to $50.7 million in its most recent reporting period.
Still, that is a significant loss for the company that has yet to turn a profitable year since going public. In those same disclosures from last month (before the Florida studio closed), Digital Domain said it was awarded nearly $80 million in grants from Florida excluding bonds, and was operating with a payroll of $32.1 million excluding senior management.
But all of that changed Friday when Digital Domain said it was letting go of its Florida staff, and was considering seeking out bankruptcy protection.
Textor has been replaced in the interim by Ed Ulbrich and Michael Katzenstein. While the Florida studio has closed, other locations in California and Vancouver remain open, and the company continues to work on special effects for the upcoming film “Ender’s Game.”
Despite all the changes, it seems that the plan to have students pay for the chance to work might still be intact. Digital Domain maintains a school in nearby West Palm Beach in partnership with the Florida State University. It’s not clear how that partnership will be affected by the closing of Florida operations for the company.