Fuel Stake Energizes Knickerbocker Shareholders
The first annual meeting of the L.L. Knickerbocker Co., a marketer of collectible dolls and teddy bears, was the stuff of Hollywood melodrama.
Actress Farrah Fawcett, a company director, caused a delay at the start by arriving late, but she was reelected anyway. Entertainer Marie Osmond, a shareholder who peddles the company’s biggest-selling product, also glided in late, a victim of nasty airport traffic.
And after Tuesday’s meeting, filmed for posterity, they all went outside the Century Plaza Hotel Tower in Century City to watch a new Ford Taurus drive off into the sun--powered by an alternative fuel in which the company now has a stake.
For the Rancho Santa Margarita merchandiser, the first 17 months of its public life have been both glamorous and controversial.
The spotlight on Knickerbocker first flashed last summer when its stock shot from $4 a share to $52. Now the company is betting some of its future on an alternative fuel.
Knickerbocker says it’s purchased a 40% stake in a company called Pure Energy Corp., which holds the exclusive license to manufacture and distribute the fuel developed at the Princeton University Plasma Physics Laboratory, which is funded by the Department of Energy.
“This isn’t the total answer,” Stephen F. Paul, the lab’s research physicist who developed the fuel, said before the meeting. “There are a lot of other alternative fuels.”
Fawcett, for one, was enthused about the new fuel and didn’t think for a minute that the investment was unnatural for a company that has been hawking jewelry, dolls, teddy bears and other celebrity-endorsed items on home-shopping channels.
“Knickerbocker is so much more than collectibles,” Fawcett said. Her own view, she said, is to get the company involved in whatever products help people. She was worried, she said, when Louis L. Knickerbocker, the company chairman, first brought the investment to the board several months ago.
“I thought, ‘Oh, please don’t let this be one of those things that just isn’t possible’--you know, one of those environmental things that people try to push through that for one reason or another just doesn’t happen,” she said.
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The new fuel, as yet unnamed, was nearly all that directors, officers and some 100 stockbrokers and shareholders of Knickerbocker could talk about at Tuesday’s meeting.
That included controversial broker Rafi Khan, who raved that it “could potentially solve the air pollution problems of L.A.”
Khan decided a year ago that Knickerbocker stock was undervalued and began buying it and urging his broker friends to do the same. At that time, the small company was marginally profitable, with sales of only $7.8 million in 1994.
Khan’s involvement sent the stock soaring. It also sparked inquiries by federal regulators as well as increased trading by so-called short sellers, who profit by a fall in the stock price. The war between those promoting the stock and those trying to push it down caused wild swings of 20% or more in the daily closings last fall.
Knickerbocker shareholders and broker friends held on against the short sellers, eventually forcing them out. The stock split 5 for 1, and the company never looked back.
On May 24, the stock hit a high of $16.25 a share, which on a pre-split basis would have been $81.25.
Though it has high hopes for Pure Energy, Knickerbocker still relies on one product and one medium for most of its revenue. The Marie Osmond porcelain dolls account for 40% of Knickerbocker’s revenue.
But Knickerbocker recently bought three fine-jewelry and costume jewelry makers, whose combined revenue of about $20 million last year was more than double Knickerbocker’s $13.1 million in sales.
Knickerbocker said he plans to look for more companies to purchase. He also reiterated his standing expansion plans: “I still want to grow to $1 billion in sales.”
