The demise of Wizard Magazine has certainly been the talk of the industry, as has the plan to launch an online magazine called Wizard World in the coming weeks. From my vantage point, as a public equity investor, the most notable component wasn’t the end of the print magazine, or the unceremonious way in which some of the staff were dismissed, but instead the fact Wizard is now a publicly traded company.
Gareb Shamus, recently appointed President and CEO of public company Wizard World, Inc. (“Wizard World”) (OTC: GOEE.PK), today announced that the Comic Con Tour, which consists of pop culture conference events that provide high visibility marketing opportunities to pop culture brands and companies in multiple venues throughout the year, is now being produced by public company Wizard World.
Upon reading this, my first instinct was to pull up the stock quotation and see what I could find out about the company. I’m sure many of you did the same thing…yet when you typed in the symbol: GOEE.PK, you didn’t find a company named Wizard World. You found a company named GoEnergy, Incorporated. By its description, GoEnergy is:
An exploration stage Company which plans to ultimately engage in the exploration of mineral properties and to exploit mineral reserves it discovers, if any, that demonstrate economic feasibility, if any.
So what gives, you ask? Did the press release get the stock symbol wrong? No, you found the right company, you just didn’t realize it. As it turns out, Gareb has orchestrated what is known as a reverse merger. Essentially, the way a reverse merger works is pretty simple:
1) Identify a shell company that is already a publicly-listed security
2) Acquire the majority of the shell company’s assets (in this case, shares)
3) Merge the private assets of your company with the shell company
4) Voila, you are now “publicly traded”
This entire process is documented, by law, in GOEE’s SEC documents. Every time a “material change” occurs with a company, even one on the OTC Bulletin Board, it must file what’s called an 8K statement. By taking the time to read through GOEE's recent 8K filings, we get a clear picture of just how Gareb Shamus and Wizard went from a privately held company into a publicly-traded one through a reverse merger.
Transaction Timeline
September 21, 2010
- KTC Corp was incorporated in Nevada
September 29, 2010
- KTC Corp issues 16 million shares to KTC, LLC in exchange for the rights to produce the Atlanta Comic Con, Big Apple Comic Con, Cincinnati Comic Con, Connecticut Comic Con, Nashville Comic Con, New England Comic Con, North Coast Comic Con and Toronto Comic Con.
- GoEnergy agrees to acquire the entirety of the stock of KTC (“Kick the Can”) Corp and its subsidiaries, and in exchange, GoEnergy issues 33.43 million new shares of GOEE to the KTC owners.
- As a result, Gareb Shamus (the owner of KTC Corp) and his KTC partners becomes the effective owner of 95.51% of GOEE.
- Strato Malamas, the former majority owner of GoEnergy, agrees to surrender his 2.75 million shares of GOEE, removing him from the equation.
- Bridge notes were issues to four creditors in the aggregate amount of $200,000 – with various provisions for when the notes could and would be paid back, and in the interim the notes pay 8% annual interest
- The merger agreement is completed
- GOEE becomes the owner of KTC Corp, described in the documentation as: “a producer of pop culture and multimedia conventions across the United States that markets movies, TV shows, video games, technology, toys, social networking/gaming platforms, comic books and graphic novels.”
- As previously disclosed, GOEE assigns 33.43 million shares of its stock to the shareholders of KTC Corp (of which Gareb Shamus is the majority shareholder and sole director)
- Terry Fields, who had been the operating executive of GOEE while it was an energy company, effectively resigns from all officer positions, except for the CFO (Chief Financial Officer) role
- Gareb Shamus is appointed President and Chief Executive Officer of GOEE
- GOEE enters into agreement with a number of accredited investors for the issuance and sale of $1.5 million in convertible preferred stock
- Terry Fields resigns as CFO citing that it was not the result of any disagreements with the company or related to any component of the company’s operations
- Vadim Mats was named a director of GOEE
- The board of directors and stockholders approved the name change from GoEnergy, Inc. to Wizard World, Inc.
So what now?
Based on the company’s initial filings, Wizard is primarily focused on running its current slate of conventions, as well as acquiring and developing more convention assets. Why did Shamus feel the need to become publicly-traded? That is up for him to answer, and we’ve reached out to his team and they’ve told us to expect a response. As soon as they’ve responded, we will update this article with their comments.
As it stands, I would expect Wizard World, Inc. to also consider changing its stock symbol from GOEE to something more indicative of its new corporate brand. Normally company’s seek to be publicly listed in order to create liquidity (i.e., generate cash flow necessary to run operations and grow the business), create scale and to diversify the ownership base. I presume Gareb has those goals in mind.
Investor Suitability
Let's be crystal clear. I am not going to offer any advice or opinion on the merits of GOEE. It's up to every individual to do their own due diligence and to make sure they fully understand the risks inherent in any investment, and whether said investment is suitable for them. But I did want to share some resources with you that discuss OTC (over-the-counter) stocks and reverse merger companies. Any investment carries with it risk, but OTB Bulletin board companies (of which GOEE is one) are, by their nature, riskier investments than their listed counterparts you would find on the Nasdaq or the New York Stock Exchange.
- SEC Guide to Microcap Stocks
- SEC Guide to OTC Pink Sheets
- Fred Wilson's thoughts on reverse (or backdoor) IPOs
- Motley Fool Straight Talk on Penny Stocks
Jason is a mutant with the ability to squeeze 36 hours into every 24-hour day, which is why he was able to convince his wife he had time to join the iFanboy team on top of running his business, raising his three sons, and most importantly, co-hosting the 11 O'Clock Comics podcast with his buddies Vince B, Chris Neseman and David Price. If you are one of the twelve people on Earth who want to read about comics, the stock market and football in rapid fire succession, you can follow him on Twitter.
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Investing in Wizard stock might be the only faster way to lose a return on your investment than by buying new comics.
these people are Capitalists, clearly
@Impossibilly I laughed and then cried a little.
I seriously can’t see this taking off at all.
Fantastic article! Very interesting background to the moves we saw occurring!
Hopefully Lou Ferigno will also be made a partner considering he is at every single Wizard World Convention always!
Knowledge dropped. Great breakdown Mr Wood.
Great job!
If you were in one of my corporate finance classes I would give you an A. 🙂
You’re foolish if you invest in this unstable trainwreck penny stock. Unless it’s for a laugh!
I am in awe Jason. Any time anybody can break the murky (to me) world of finance into something that I can understand I am greatly appreciative. I had never heard of a reverse merger before, seems a little sketchy (especially since the companies are so different) but I’d guess it happens all the time. Kudos, good sir.
My only question is did KTC still retain the rights to the publication or did it only purchase rights for the Shows?
Excellent job as always Jason. I bet Wizard didn’t expect a combo Comic Fan/ Wall Street maven to break it down for the public at large.
I will stick with my Disney stock
cheers
nice going jason. you’ve provided clarity to these moves that would have us layman scratching our heads .
That’s the Wood I know and love. Great job buddy!
The Tiki
Informative article.
For whatever reason I’m curious to know how GoEnergy and Shamus ever found each other. It seems that GoEnergy is sitting on some land in Canada intended for mineral exploration (but which as of yet has yielded nothing). How did that company go public. And why do the deal with a media company?
Anecodotally, Blockbuster (the movie rental co.), started out as an energy company as well.
With the way this venture started, along with the rather sketchy process followed to go public, I’m having flashbacks to Ron Pereleman’s time as owner of Marvel and the games he played with shell corp.’s and iffy stock schemes. I wouldn’t add this to a mutual fund any time soon.
Thanks everyone.
@NaveenM — I too am curious about how Gareb came to know of GoEnergy. Maybe he’ll address that when he issues his official response to my inquiries.
@Wood: Should the dates for January be 2011 instead of 2010?
So, with the cash he made liquid to go after the majority of GoEnergy shares (if I read the above correctly), could Shamus have not continued to run Wizard as-is indefinitely?
Jason, how do stock moves like this work out for companies? Other than the ease and speed, is there any benefit for Shamus to pursue investors like this rather than doing a regular IPO for his own company?
@BC1 Yes, thanks for catching that. 2011, not 2010.
@WilliamKScurryJr There wasn’t a lot of cash that changed hands in this transaction (absent the $1.5 million investment by an outside investor concurrent with the merger). Gareb didn’t have to pay a lot of money to acquire his shares (the shares had a par value of $0.001 per share.)
@scottced Franky this is a different tier of company that lists this way. Traditional IPOs, save for the go go days of the Internet bubble a decade ago, are reserved for companies of much larger size than Wizard. A traditional IPO simply wasn’t an option for them. The trick with listing as a bulletin board stock is that the listing requirement, disclosures, etc…are MUCH MUCH less stringent than if you’re listed on an exchange. While that may serve the company well (less legal costs and need to disclose things), I don’t see how that’ beneficial to potential investors because less disclosure, less regulation = greater risk.
Great article that didn’t make my head hurt. Thanks, Wood.
While it must be perfectly legal and above-board, this whole shell company/reverse merger thing just seems fishy. What if I was interested in investing in GoEnergy and all the things it promises (raping the earth – YEAH!!!), but find out I’m investing in helping Lou Ferrigno pay his grocery bill this month? I’d probably be kinda pissed – it seems to me like it’d be Google suddenly going into the automobile manufacturing business.
I’m sure there are all kinds of filings and reports these companies have to send shareholders before they do these things, but still, it just seems kind of underhanded to me.
I think Gareb secretly hopes his new company will be bought by Disney.
What an awesome article, really nice job Jason.
Interesting loophole to become a publicly traded company. I’ve never heard of this method, but it definately makes sense. I don’t know who the hell would invest, but I guess it’s easier than building capital the old fashioned way
Hey! What happened to that interview with the Wizard employee that was posted on iFanboy. Did it get taken down??? I can’t find it now.
@corpseed It’s linked right in the first paragraph.
@conor oh my bad.. I couldn’t see it in the feed at all. Cheers.
@ Jason Wood – thanks for breaking this down. You’re like the Carl Sagan of finance.
I can only assume the magazines were losing money, or barely breaking even. So how much do you think WW makes from the conventions? That must be where the money is, otherwise how could they get aynone to buy stock.
“Sell, Mortimer, sell!”
I feel smarter by reading this.
And CBR linked to the article. Pretty cool.
One thing that really baffled me was in the discussion of “Competition”
I love how they make no mention of Reed, which is CLEARLY their biggest competitor and part of an enormous publicly traded company.