Stock Slide Surprises Beverly Hills Fan : Finances: The Woodland Hills firm’s shares dropped more than 50% before issuance of a negative third-quarter report. An analyst says he was misled.
After almost a decade of selling ceiling fans, Beverly Hills Fan Co. plans to try selling chandeliers next year. But in 1992, the story is the Woodland Hills-based firm’s stock, which has plunged from a high of $3 earlier this year, to 56.25 cents as of Monday’s close. The decline has baffled the company and led to angry accusations from one analyst that management misled him.
Only last spring, it looked as if Beverly Hills Fan was headed for a record year. Through fast-growing home improvement outlets such as Home Depot, sales of the company’s upscale, do-it-yourself fans doubled to $4.8 million for the six months that ended April 30, compared with a year ago. Profits also doubled, hitting $303,000. And the company’s stock hovered around $3, 50% more than the price when Beverly Hills Fan went public in June, 1991.
But then things began to sour. In its fiscal third quarter that ended July 31--traditionally the company’s strongest quarter--Beverly Hills Fan posted a 20% drop in sales and a profit of just $3,000, compared with earnings of $240,000 a year earlier. The company blamed the drop on the cooler summer months and heavy bulk-order shipments in the previous quarter.
However, by early June--well before Beverly Hills Fan came out with the bad news--the company’s stock price had fallen more than 50%. Company Chairman Hoyne Greenberg and his son, Shelley, who is president, didn’t understand the price drop. In fact, it was in early June when Beverly Hills Fan announced its record fiscal second-quarter performance.
“We were looking at each other and wondering what happened,” said Shelley Greenberg, 41. His 73-year-old father added, “It’s crazy, it’s just crazy.”
But one analyst, Seth Feinstein of Crowell, Weedon & Co. in Los Angeles, thinks there’s more to the story. Feinstein alleges that “somebody knew things weren’t well and sold” the stock. Feinstein said he has no evidence of insider information, but he criticized Beverly Hills Fan management for failing to give him signals about the company’s eroding performance.
Feinstein said he approached management after the company’s record fiscal second quarter. “But they gave me no inkling about the third quarter,” he said. “I felt misled.”
“I think he’s totally off base,” countered Shelley Greenberg, noting that he told Feinstein that he could not provide him with any advance information. “I told him I couldn’t tell him anything right now.”
The Greenbergs speculated that the company’s stock, which is thinly traded on the NASDAQ market, fell because of the demise of the Colorado securities firm that underwrote Beverly Hills Fan’s public stock offering. That firm, J. W. Gant Financial Inc. of Englewood, shut down in July after several months of financial and regulatory problems.
As late as March, Gant directly and through its clients held 1.7 million of the 4.66 million shares of Beverly Hills Fan’s common stock, according to Neil MacDonald, the company’s comptroller.
The Greenbergs believe that when Gant executives and clients learned of Gant’s troubles, many unloaded their holdings as fast as they could, sending Beverly Hills Fan stock spiraling downward.
“They sold it at whatever price they could get to get rid of it,” said Shelley Greenberg, who with his father and other insiders hold about 45% of Beverly Hills Fan’s stock.
Bob Mescal, a research analyst at New Issues, a Florida publication that provides information and advice on stock purchases, said the Greenbergs’ explanation is entirely plausible. “If it’s a small company, it’s more likely a situation like that will occur,” he said.
Despite the stock’s dramatic decline, analysts say Beverly Hills Fan remains financially healthy, because it has a relatively strong balance sheet after last year’s public offering that raised $2.3 million. As of July 31, the company reported assets of $5.2 million and total debt of $1.2 million, according to Securities and Exchange Commission documents.
For their part, the Greenbergs hope that their new line of lighting systems will add to the company’s future revenue. The company already sells lights as parts of ceiling fans, and most other major ceiling fan firms, including Hunter Fan Co. and Casablanca Fan Co., also sell lights. But until recently, Beverly Hills Fan didn’t have the cash to get into the lighting market. Recently, however, the company spent $1 million developing lighting products, which like its fans, are manufactured in Taiwan.
By February, Beverly Hills Fan plans to introduce a line of 22 styles of do-it-yourself lighting systems--which include chandeliers, matching wall sconces and pendants. Like its fans, the company’s lights come in sleek, “transitional” styles--which the company says is between traditional and contemporary--and will retail for $199 and $399 each, compared with a price tag of between $99 and $599 for fans.
The lighting industry is a $10-billion business, 10 times bigger than ceiling fans, according to analysts.
And unlike sales of fans, which are seasonal, lighting products sell year-round, which could help Beverly Hills Fan.
“It fits in nicely with ceiling fans,” Greenberg said. “It doesn’t require more staff and it fits in with our distribution channels.”
Beverly Hills Fan Co. at a Glance Despite its name, Beverly Hills Fan Co. is actually based in Woodland Hills. Founded in 1983 by Hoyne Greenberg and his son, Shelley, who are currently chairmen and president respectively, the company designs ceiling fans that are sold through home development centers such as Home Depot. The company went public in June, 1991, but its stock has taken a nose-dive this year as its profits narrowed. The company plans to add lighting systems to its product lineup next 6 years.
For ficsal years ended Oct.13
