One “Sin” Stock I Just Won’t Own

Jan 10, 2014
J. Webster
Comments Off on One “Sin” Stock I Just Won’t Own

blackfish

There’s one stock I just won’t buy based on principal. Actually, you can borrow shares in this company and short it if you like, but owning shares in this company and hoping the stock goes higher, that just doesn’t seem right. The stock isn’t involved in the military or gun manufacturing or even tobacco, it’s actually in the entertainment sector, focusing on trying to delight families and specifically, kids.

Sometimes these types of stocks, gambling or tobacco companies, are called sin or vice stocks, and actually steady when the economy is doing poorly, because people won’t stop purchasing the products they sell. Why? Maybe because they’re addictive! Who can resist cigarettes, alcohol or gambling. I bet you didn’t know Rick’s Cabaret International, the strip club, is a public company and trades under the symbol RICK. Want to buy a stock in a company who focuses on gambling? There’s Las Vegas Sands Corp., with the ticker LVS. How about a company you sells cigarettes and or stiff drink? There’s cigarette maker the Altria Group, with the ticker MO., and Jim Beam is public with the ticker BEAM. There’s even a fund that focuses solely on “vice” stocks: VICEX Fund (NYSEMKT: VICEX).

And while this company isn’t on the list of sin stocks, perhaps it should be.

Sure, I realize that it’s tough to own a stock or company that doesn’t have some negative aspects to it. Take a company like the beloved Apple, which has had trouble related to working conditions in some of its factories in China. But this one company’s main product they sell to the public as entertainment is actually suffering.

The company I won’t own shares in is SeaWorld. With the ticker SEAS. Why? I guess you haven’t see the documentary about SeaWorld called Blackfish. Here’s the trailer.

The film is certain to hurt attendance numbers at all the SeaWorld theme parks and is already causing performers to cancel concerts at the parks. The Blackstone group owns about 40% of SeaWorld after helping it go public just three months before the Blackfish film was released. What’s funny though is a sin stock company, Anheuser-Busch, sold SeaWorld to Blackstone for $2.3 billion in 2009. Looks like the king of beers escaped a big headache.

For now, the Blackfish film hasn’t hurt Blackstone, as they made plenty of money on the IPO for SeaWorld. The question though is what’s going to happen to SeaWorld’s stock as attendance at the parks starts to decline and more protesters come forward. What’s worse, is the movie Blackfish is up for an Oscar, which could lead to only more negative press-I’m sure SeaWorld is praying the documentary doesn’t win.

Moreover, what happens when the big funds and institutional investors who own shares of SeaWorld are pressured to sell their shares by protesters. The stock most certainly will turn lower. Right now it’s hovering just above its IPO price of $27. Even the great and might Goldman Sachs is sucked into this mess. Yes, the Vampire Squid owns 2,330,095 shares of SeaWorld as of September 30, 2013. I don’t think Goldman Sachs wants any more bad press-I’m guessing their trying to make this go away.

Oh, and don’t worry the bankers and the underwriters made out just fine. They all got their fees for helping SeaWorld go public and then some just a few months ago, when they sold additional shares for Blackstone. But after the film, are even the bankers going to want to work with SeaWorld in the future?

To me, SeaWorld is going to have to make drastic changes to alleviate and appease the push back from the Blackfish film. But how? If killer whales in the open ocean travel nearly 100 miles in a day, how can you keep them in captivity at a theme park? That’s a huge problem that SeaWorld and now Blackstone face.

The director of the film, Gabriela Cowperthwaite, has said that should didn’t set out to destroy SeaWorld, but wanted them to change, become perhaps a marine sanctuary for whales rather than a circus.

Today, SeaWorld has 11 theme parks in the United States, but has hoped to expand and open parks internationally, although now the film might make that more difficult. What’s more, SeaWorld has over $2 billion in debt, so it seems it would be hard to fund any expansion.

The next earnings release for SeaWorld will be very interesting to listen to.

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