Cannon Stock Off as Stallone Film Misses Mark

The stock price of Cannon Group, depressed for months by red ink and government watchdogs, hit new lows this week in the wake of the dismal U.S. box-office results of its movie “Over the Top.”

Featuring Sylvester Stallone as an arm wrestler and personally directed by Cannon Chairman Menahem Golan, the film cost more than $20 million to make--including $12 million paid to Stallone.

An analyst estimates that another $5 million was spent for prints and advertising.

Ironically, it is another film studio, Warner Bros., whose parent Warner Communications invested $75 million to bail out Cannon from a financial crisis in December, that actually stands to be the big loser on “Over the Top.”

That is because Warner Bros. long ago bought all domestic distribution rights to “Over the Top” for an amount estimated by outside observers at $12 million to $15 million.

As distributor in this country and Canada, Warner had the added expense of making all the prints and promoting the movie. That would put Warner’s stake in the film at $17 million to $20 million. A Warner corporate spokesman did not return telephone calls from The Times on Thursday.

“Over the Top” sold $5.15 million in tickets for its opening on 1,758 screens during the three-day Presidents’ Day weekend. It appeared to be a rare flop for Stallone, who has made fortunes for himself and other studios with his “Rocky” and “Rambo” pictures.

Cannon claimed Thursday that it is already in the black on “Over the Top,” because of its advance sale of rights, both overseas and at home.

Barry Lublin, senior executive vice president, conceded that the U.S. box-office results had pushed down Cannon’s stock price this week to $8 at the end of trading Thursday from $10 two days earlier and did indeed disappoint management. However, he said:

“The company has lived up to its commitment to have pre-sales greater than the (cost of the film negative). The company is in profit on ‘Over the Top’ right now. We’re disappointed because the United States (box office) didn’t do better, because we would like overages.”

He pointed out, however, that its opening last weekend in Japan took in a resounding $1.25 million on only 18 screens in Tokyo and Osaka. That was an average of nearly $70,000 per screen, compared to the relatively dismal $2,900 per screen domestically.

One U.S. securities analyst said Cannon probably will make a modest profit, while Warner is exposed to loss. Noting that a film generally is pulled from the theaters when its weekly box-office take drops to less than $2,000 per screen, the analyst said the opening at around $3,000 per screen could make it an early casualty of the frequent attrition in box-office receipts after the opening flurry.

Another analyst noted that Cannon-made films released in recent months have continued a trend of disappointing U.S. box-office results. This year’s duds have include “Allan Quatermain and the Lost City of Doom” and “Assassination.” Meanwhile, observers are awaiting a company disclosure of a special audit undertaken under pressure of the Securities and Exchange Commission, which last summer launched an informal inquiry into the way Cannon accounts for its film costs. The SEC escalated the inquiry in mid-September into a sweeping formal investigation of Cannon’s public disclosures since 1983 of its profit reports and financial condition.

The company reported a $14.5-million net loss for the third quarter ended Sept. 27.