Texas Business Report: Film Fund May Be Slashed
Tightening the budget means the Lege may reduce film incentive spending by nearly $30 million, a decision that could end up costing millions in economic impact.
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The Texas economy is one of the most robust in the world. Wildly profitable companies and ingenious entrepreneurs call this state home, and what happens here influences businesses around the nation. Here’s a slice of the profits, losses, big deals, and backroom decisions happening across Texas this week.
Film Fund Farewell?
As state legislators seek out ways to trim the fat from the 2013–2014 budget, proponents of the Texas Film Commission’s incentive program are speaking up to keep its funding intact. The Texas Moving Image Industry Incentive Program—which offers tax breaks to Texas-based film, TV, video game and advertising productions that hire predominantly local crews—“currently receives $32 million in state funding, and the TFC wants that amount increased to $35 million,” according to the Austin Business Journal.
However, the new budget proposed by the House and Senate allocates just $4.2 million to be shared by the TFC and the Texas Music Office—none of which would go toward incentives.
The Bottom Line: The TMIIIP has awarded $94 million in incentives since it was created in 2007, which “has led to $744 million of direct spending in Texas, a return of $7 for every dollar invested,” the ABJ reports. The fund has supported projects such as TNT’s TV series Dallas, which spent $20 million in the state.
Pasta La Vista
Ignite Restaurant Group’s announcement that it plans to buy Romano’s Macaroni Grill has been met with a cold response from investors. Shares of the Houston-based company—which is also the parent of Joe's Crab Shack and Brickhouse Tavern + Tap—dropped by as much as fourteen percent on Thursday after the $55 million deal was made public. Analysts at Raymond James and Robert W. Baird & Co. have already downgraded their ratings of the company’s stock.
The Bottom Line: The investment blog Motley Fool attributes shareholders’ tepid reaction to concerns about Ignite’s decision to take on $50 million in debt and open a $100 million credit line to finance the acquisition. Additionally, it is possible that “the market sees this as an example of ‘diworseficiation,’ as Ignite has only been public for about nine months.”
New Track for RadioShack
Mired in a years-long financial slump, RadioShack is hoping a new CEO will help the company return to profitability. Joseph C. Magnacca, a former Walgreen Co. executive, will take over the top position at the beleaguered Fort Worth–based electronics retailer on Monday, Bloomberg reports. He will be RadioShack’s fourth CEO in just three years.
Analysts attribute the company’s struggles to “price transparency within the consumer electronics sector,” which makes it easier for big-box retailers like Best Buy and Amazon to pull customers away from RadioShack by offering better deals online.
The Bottom Line: Magnacca has his work cut out for him: RadioShack’s stock fell by nearly eighty percent last year, and the company is expected to report a net annual loss of more than $70 million for 2012 in a filing later this month. An analyst quoted by Bloomberg said the first step to turning the company around should involve “closing stores and figuring out a way to increase the profitability of their wireless business.”
Winner of the Week: Opexa Therapeutics
Shares of The Woodlands–based Opexa Therapeutics spiked this week on news that the company has licensed “the development and commercialization” of its multiple sclerosis drug Tcelna to German pharmaceutical giant Merck “in a deal potentially valued at $225 million,” the Wall Street Journal reports. Under the agreement, Opexa will receive an upfront payment of $5 million and could earn up to $25 million in licensing fees and as much as $195 million in additional payments as the drug is commercialized.
On Thursday the company announced that to fund clinical trials of Tcelna, it will offer “1.08 million shares of common stock at $3 per share, which is expected to bring in gross proceeds of $3.25 million,” according to the Houston Business Journal.
Loser of the Week: First National Bank
Edinburg-based First National Bank appears to be struggling to stay afloat, releasing a quarterly filing this week that shows a $42.8 million loss in the last three months of 2012 and a total loss of $125.3 million for the year, the San Antonio Express-News reports. Things have gone from bad to worse for the bank, which “only” lost $26 million in all of 2011. In recent years it has been embroiled in a series of legal battles with investors who claim the company defrauded them in real estate deals that went belly up—including a Houston businessman who is seeking at least $25 million in damages.