In its first day of trading on the New York Stock Exchange, Columbia Pictures Entertainment Inc. stock fell slightly Friday as shareholders unloaded some of the shares they received as a result of Coca-Cola's recent merger of Columbia and Tri-Star Pictures.
Coca-Cola is spinning off 34.1 million shares of Columbia Pictures to its shareholders as a one-time taxable dividend, reducing its stake in the company to 49% from 80%.
Analysts had predicted that the price of the new stock would drop as large institutional investors chose to sell rather than hold on to what they consider to be a volatile entertainment issue.
Separately, neither Columbia nor Tri-Star has performed well in the past few years, failing to produce box-office hits. Last summer, the costly flop of the Warren Beatty-Dustin Hoffman film "Ishtar" triggered an operating loss for Coca-Cola's entertainment business sector, which included Columbia, Coca-Cola Television and stakes in Tri-Star, De Laurentiis Entertainment Group, Weintraub Entertainment Group and the Loews Theater chain.
Columbia recently announced plans to dismiss as many as 500 employees, or about 14% of its work force of 3,500 people, as part of a restructuring.
After a huge volume of trading Friday--785,000 shares changed hands--Columbia closed at $7.50, down 37.5 cents a share. While the decline was relatively small, it came on a strong day on Wall Street when many entertainment stocks rose sharply. Analysts said they believe that Columbia may drop further in the weeks to come.
"The feeling is that a lot of those 34 million shares will be sold, causing the stock to go down," said Lisbeth Baron, an analyst for the New York investment firm of Balis, Zorn Gerard. "It's a good, solid company with big assets, so if it takes a beating and goes down 20%, it would be undervalued and we'd start buying it."