Midway Games' outlook falls to '96 low
Midway Games Inc., the video-game publisher controlled by billionaire Sumner Redstone, fell to 38 cents a share, the lowest since 1996, because of concerns about debt default.
The Chicago-based company, maker of ``Mortal Kombat,'' declined 5 cents, or 12 percent, to 38 cents in New York Stock Exchange composite trading today. Trading was halted at 9:47 a.m. The shares have plunged 86 percent this year.
A $79 million convertible note due in April will be a challenge in the ``current economic environment,'' Midway Chief Executive Matthew Booty said on a conference call yesterday. Midway, which hasn't had a profit in more than three years, had $10.4 million of cash at the quarter's end. If Midway converts the note into stock, shareholders would see the value of their shares decline.
``It's a big problem. I don't know how they can pay it back,'' Daniel Ernst, an analyst at Soleil Securities Corp., said.
Midway's third-quarter loss widened to $75.9 million, or 83 cents a share, from a loss of $33.5 million, or 37 cents, a year earlier, because of rising costs to develop titles, the company said yesterday.
``The company is in a pretty tight financial situation right now,'' Edward Woo, an analyst at Wedbush Morgan Securities in Los Angeles, said in an interview. He recommends investors hold the shares and doesn't own any. ``This definitely adds to their challenges.''
Cash Positions
National Amusements, Redstone's holding company, loaned Midway $90 million and bought $40 million of the company's receivables in the period. National Amusements was forced to sell $233 million of its holdings in Viacom Inc. and CBS Corp. last month to comply with debt covenants.
Redstone may not be able to help Midway with the note that matures in April, Woo said.
``It's a lot of money for a company that only has about $10 million in cash,'' Woo said. ``The question becomes, `What's going to happen?' I don't think anyone really knows.''
Shari Redstone, 54, resigned as Midway's chairman to oversee National Amusements' talks with banks. National Amusements and Redstone control 87 percent of Midway shares.