In January of 2013, Magnolia Pictures acquired distribution rights to an incendiary documentary entitled Blackfish. This piece chronicles the life of a killer whale named Tilikum whom the park had held in captivity for almost 30 years by that point. A male, the orca nicknamed Tilly is considered the most successful whale sire in captivity. He has fathered 21 children, including two as recently as 2010.
Despite his popularity as a stud, Tilly was also the recipient of a kind of killer whale bullying from others of his species who were also held in captivity at SeaWorld. Blackfish examines how and why Tilly became so aggressive as well as how much culpability the park had not only in his behavior but also the deaths of three people involved in incidents with the whale, including two of his trainers. Suffice to say that the company does not come across well in the story.
In fact, the release of the film is a blight on SeaWorld to the point that many wonder why Bridgette Pirtle, a former SeaWorld employee who claims she was not disgruntled, participated in the first place. It was later revealed that documentarian Gabriela Cowperthwaite misled Pirtle about her intentions, which has led to a curious set of mixed statements from both parties on the subject of the accuracy of Blackfish. No matter how sensationalized the documentary is, its impact on SeaWorld is undeniable. Let’s examine the six stages of SeaWorld’s decline in the wake of Blackfish.
1. SEAS IPO
Amusement park stock prices are surprisingly easy to anticipate in most instances. Casual investors think like your average person. To them, the summer months are the time for family vacations, which means that the days leading up to summer are the best time to own stocks for companies such as SeaWorld.
In early 2013, SeaWorld Entertainment’s stock, SEAS, debuted. The timing was less than optimal since Blackfish was already garnering buzz due to its January debut at the Sundance Film Festival. In addition, the third week of April when SEAS launched proved to be one of the worst stock weeks of 2013 due to lingering concerns from the Boston Marathon catastrophe.
Still, SeaWorld is a beloved family-friendly company that analysts believed would weather the storm of some negative publicity. After all, a blockbuster documentary generally earns only a few million dollars, logic that proved sound with Blackfish, whose global box office total is only $2.2 million.
Investors exchanged almost 21.7 million shares of SEAS during its April 19, 2013 debut. The stock that opened with a $27 IPO started the morning at $30.56, traded as high as $34.67, and ended its first day at $30.26. All of this is standard behavior in the madcap world of stock IPOs. What was most notable about the debut of SEAS is that 21.6 million shares were traded, totals considered tremendous by anxious investors.
2. The impact of Blackfish
By May 20, 2013, SEAS traded in the $38.50 range. The stock stubbornly refused to hit $40 due to limit trade settings by day traders, but it was still trading as high as $38.67 on July 19, 2013, which was also the debut of Blackfish. On that fateful day, SeaWorld claimed a dazzling market cap of $3.43 billion. Coincidentally or not, it has never reached that closing stock price or that market cap ever again.
Arguing that Blackfish had an instant impact is a bit unfair, though. Since investors love those theme park stocks during the summer, SEAS maintained its $3 billion mark as late as August 26, 2013. From that point, the selloff occurred as day traders sought autumn investments that better suited their needs for immediate return on investment.
3. The impact of Blackfish Year Two AKA “Revenge of the Killer Whales”
While SEAS had lost over 10 percent of its initial perceived value in only a few months, it proved itself a steady player until March of 2014. It was at this point that investors starting recognizing that consumers were skipping SeaWorld vacations during the summer of 2014. The market cap for SEAS fell another 10 percent to $2.7 billion. It held fairly steady until June 20, 2014, at which point the wheels started to come off.
After closing at $2.73 billion on June 20, 2014, SEAS plummeted under $2.5 billion to $2.44 billion on July 1st. Investors were starting to hear the buzz about flat SeaWorld attendance for the summer of 2014 from the hugely disappointing summer of 2013. The news was terrifying to many despite the fact that the numbers themselves weren’t that bad.
On the fateful day of August 13, 2014, SeaWorld provided their earnings report for the second quarter. Their market cap at the time was $2.53 billion while their stock closed at $28.15. A lot changed during the next 24 hours.
Second quarter attendance for SeaWorld actually increased 0.3 percent from 2013 to 2014. Revenue fell only 1 percent, which was a total of roughly $6 million in actual dollars. Net income was actually significantly better, as the company famously suffered an operating loss in the second quarter of 2013 as they planned for their IPO. SeaWorld earned $37.3 million in the second quarter of 2014 after losing $15.9 million during the same frame in 2013. None of this seems terrible on the surface, right?
4. Investors run away screaming
Over 41 million shares of SEAS exchanged hands on August 13, 2014. This was for a stock that had only reached 10 million in stock transactions in a single day only once before, the day of its IPO. The 41 million shares represent more activity than the SEAS stock had claimed during the entire previous month in combination.
Suffice to say that most of the people were selling, not buying. On August 13, 2014, SEAS closed at $18.90, a single day drop of $9.25. Overnight, its market cap went from $2.53 billion to $1.7 billion. After announcing an increase in quarterly earnings of $53.2 million, the total value of SeaWorld Entertainment collapsed by $800 million.
Welcome to the bizarre world of stock trading where perception equals reality. Investors were bullish about SeaWorld’s recovery heading into the summer of 2014. Once the numbers reinforced the fact that 2014 attendance was down significantly with a 4.3 percent decline, the belief that Blackfish had damaged the SeaWorld brand became pervasive.
5. The aftermath AKA “The Silence of the Killer Whales”
Notably, the $1.7 billion market cap for SEAS on Black Wednesday last August became its benchmark for the body of 2014. The stock traded with a closing price within two dollars of $18.9 for the majority of 2014. September 24, 2014, was the last day it reached $20, though.
By December of last year, SEAS had fallen under $16 before staging a slight recovery at the end of the year. On the final trading day of 2014, SEAS closed at $17.90 with a market cap of $1.54 billion. In roughly 18 months, the SEAS IPO that debuted to $3.43 billion was worth over $1.9 billion less. A $2 million-earning documentary (and some unfortunate business practices) had cost the company almost $2 billion in value.
6. The road to recovery
2015 has proven that time heals all wounds. Attendance during the first quarter of the year was up from 3.0 million in 2014 to 3.2 million. Revenue increased a modest 1 percent to $214.6 million. The company retains staggering debt of $1.64 billion, so all of these numbers suggest continued struggles. Despite them, the stock is trading around $21 once more, and the market cap for SEAS has increased to almost $2 billion. Simply stated, investors believe that the negative publicity from Blackfish has gone away, and so SeaWorld Entertainment is perceived as a viable stock once again. Effectively, many agree that SeaWorld was punished for its transgressions, served its time and is now ready to move forward in the ultra-competitive world of theme park tourism.
No matter where you stand on SeaWorld’s treatment of the marine animals that are the showcase of their parks, there is simply no disputing the fact that Blackfish was a huge black eye for the company and had a devastating financial impact. It has caused sinking attendance and static revenue during a time when most major theme parks are enjoying explosive growth. The question now becomes whether SeaWorld has weathered the storm or if their brand has become irretrievably damaged. The company’s August financial report will go a long way in deciding which one is true.
