Majesco files for Chapter 11 Bankruptcy? (UPDATE: False)

[DigitalSpace]

UPDATE: Turns out the bankruptcy news was false. From Joystiq (http://www.joystiq.com/entry/1234000743051633/):

Earlier today we received and responded to a tip from the site Das Games that stated that Majesco Entertainment Co. had filed for bankruptcy. There is no hard evidence that the rumor is true.

We’d like to point readers to the company’s latest SEC filings here (http://www.sec.gov/cgi-bin/browse-edgar?type=&dateb=&owner=exclude&action=getcompany&CIK=0001076682). There are official, legally mandated requirements for communicating momentous changes to a public company’s financial health so that all investors have equal information. When a public company files for bankruptcy, one can be certain the news will be widely communicated to the entire investing community, and not to some random blog.

Furthermore, a reader claiming to be Ken Gold, VP of Marketing for Majesco Games states that “Majesco is not bankrupt….” Just to be careful, we have contacted Majesco via email to verify the source of the comment and are waiting for a response.

Also, thanks to KJN for this information (and mikeetler for posting that HIP Interactive isn't a subsidary of Majesco, meaning that CGNO's source is probably feeling pretty dumb right now):


Looks like it they might not be bankrupt after all


We received information from a Majesco employee that Majesco itself was filing for Chapter 11 Bankruptcy Protection. It turns out they were only half right. Hip Interactive, a subsidary of Majesco, announced that it was filing for Chapter 11- not Majesco itself. Our source became confused by this, and mistakenly told us that Majesco itself was filing for bankruptcy, which is evidently not the case.

An email obtained from Ken Gold, the Vice-President of Marketing from Majesco Entertainment specifically states that the company is not bankrupt.

It was presumed correct, not only due to the employee, but the fact that Majesco has certainly seen better times financially. Earlier this week, Majesco disclosed to its shareholders that it was expecting a full-year loss. The CEO, Carl Yankowski, resigned amidst a flurry of share price drops, resulting in almost 50% of the price reducing.

Here's my original post:

Majesco Goes Bankrupt...

Looks like this explains what the deal is with Nanostray. Majesco didn't really have the money to publish a whole lot of copies of it, I guess. The worst part (well, besides people losing their jobs and such) is that a lot of good-looking DS games that were going to be published by Majesco, now may never see the light of day: A Boy and his Blob, Age of Empires, Black & White Creatures, Bust a Move DS, Guilty Gear: Dust Strikers. Thanks to stochasticooz for this.

Majesco Games, perhaps best known lately for Advent Rising and Psychonauts, has filed for Chapter 11 Bankruptcy protection. The move is the final event of what has been the worst week of Majesco's tenure in the gaming industry.

On the 13th of this month, Majesco announced that it cut its outlook by a significant margin. Upon this announcement, Majesco's stock price plummeted by over 50%. The CEO of Majesco, Carl Yankowski, resigned amidst a flurry of bad financial outlook announcements. The hardware peripheral manufacturing division of Majesco, Hip Interactive, announced that it was shutting down. Just a few moments ago, the worst was discovered; Majesco itself is filing for bankruptcy.

It was discovered that a final shipment of Nanostray for the Nintendo DS would ship out rather soon, ending Majesco's presence in the industry. Majesco was known for picking up and publishing a lot of games that other publishers wouldn't- with varying degrees of success. We'll have more on this as we get it.

Source: DAS Games (http://das-games.com/index.php?subaction=showfull&id=1122139589&archive=&start_from=&ucat=1&) (the story has since been removed)

[Slimedog]

Well, thats a shame. They've been putting out more and more critically acclaimed games as well as Bloodrayne and some other solid sellers (I assumed). Lately, you could count on them to pick up quality titles that didn't fit in the usual marketing niches. I was really starting to like them.

Now are they still operating as companies often do under chapter 11 or are the doors closed?

[pixelsnpolygons]

I'm not only actually surprised but kinda disappointed

[RetroYoungen]

Well, that sucks.

[GarrettCRW]

Now are they still operating as companies often do under chapter 11 or are the doors closed?

By definition, Chapter 11 is reorganization. If they were going through with a liquidation, then it'd be Chapter 7.

Of course, Majesco's creditors have the final say in such matters.

[DTJAAAAMJSLM]

I hope they pull through, I was really anxious to check out the new A Boy & His Blob and Guilty Gear games that they were bringing to the DS and PSP.

[Crush Crawfish]

This sucks more than I can rationally comprehend. Majesco was one of the few US publishers willing to take risks on publishing unique and original titles like Psychonauts, Nanostray, and Raze's Hell. And Just look what happened to them because of it. :sigh: I guess that's what happens in this industry. It sucks. Even if they do recover from this, I get the feeling they're going to do nothing but licensed crap. Profitable, but still crap nonetheless.

farewell, sweet majesco. We barely knew ye.

:plays taps: :(

[Lothars]

I agree it's a crying shame

I really hope majesco can work out of this and keep creating the game that they are making I only just heard about Raze Hell, but I think that the reason they did is unfortunatly they are creating the unique games and the sad thing is the unique games don't sell as much as the regular types of games

o well hopefully everything will work out for the company.

[KJN]

Looks like it they might not be bankrupt after all


We received information from a Majesco employee that Majesco itself was filing for Chapter 11 Bankruptcy Protection. It turns out they were only half right. Hip Interactive, a subsidary of Majesco, announced that it was filing for Chapter 11- not Majesco itself. Our source became confused by this, and mistakenly told us that Majesco itself was filing for bankruptcy, which is evidently not the case.

An email obtained from Ken Gold, the Vice-President of Marketing from Majesco Entertainment specifically states that the company is not bankrupt.

It was presumed correct, not only due to the employee, but the fact that Majesco has certainly seen better times financially. Earlier this week, Majesco disclosed to its shareholders that it was expecting a full-year loss. The CEO, Carl Yankowski, resigned amidst a flurry of share price drops, resulting in almost 50% of the price reducing.

[SamuraiSmurfette]

good. Hip peripherals were only sub-par.
Majesco has been on my top five dev/pub list since Iridion 2
I'd REALLY hate to see them go :(

[mikeetler]

We received information from a Majesco employee that Majesco itself was filing for Chapter 11 Bankruptcy Protection. It turns out they were only half right. Hip Interactive, a subsidary of Majesco, announced that it was filing for Chapter 11- not Majesco itself. Our source became confused by this, and mistakenly told us that Majesco itself was filing for bankruptcy, which is evidently not the case.

An email obtained from Ken Gold, the Vice-President of Marketing from Majesco Entertainment specifically states that the company is not bankrupt.

It was presumed correct, not only due to the employee, but the fact that Majesco has certainly seen better times financially. Earlier this week, Majesco disclosed to its shareholders that it was expecting a full-year loss. The CEO, Carl Yankowski, resigned amidst a flurry of share price drops, resulting in almost 50% of the price reducing.

Only problem with this "story" is Hip Interactive is not a subsidiary of Majesco. The only dealings the two had is that Hip distributed GBA Video carts in Canada.

[maxlords]

The latest on Majesco:

http://biz.yahoo.com/prnews/050720/phw045.html?.v=14


Shareholder Class Action Filed Against Majesco Entertainment Company by the Law Firm of Schiffrin & Barroway, LLP
Wednesday July 20, 6:00 pm ET


RADNOR, Pa., July 20 /PRNewswire/ -- The following statement was issued today by the law firm of Schiffrin & Barroway, LLP:
Notice is hereby given that a class action lawsuit was filed in the United States District Court for the District of New Jersey on behalf of all securities purchasers of Majesco Entertainment Company (f/k/a Majesco Holdings Inc.) ("Majesco" or the "Company") (Nasdaq: COOL - News) between December 8, 2004 and July 12, 2005 inclusive (the "Class Period").

If you wish to discuss this action or have any questions concerning this notice or your rights or interests with respect to these matters, please contact Schiffrin & Barroway, LLP (Marc A. Topaz, Esq. or Darren J. Check, Esq.) toll free at 1-888-299-7706 or 1-610-667-7706, or via e-mail at info@sbclasslaw.com.

The complaint charges Majesco, Carl J. Yankowski, Morris Sutton, Jesse Sutton, and Jan E. Chason with violations of the Securities Exchange Act of 1934. More specifically, the Complaint alleges that the Company failed to disclose and misrepresented the following material adverse facts which were known to defendants or recklessly disregarded by them: (1) that the Company's transition from a narrow focused gadget video game company to a diversified video game company with premium frontline publishing was off track; (2) that the Company, contrary to its express representations, was experiencing generally weak consumer demand and had high retail inventory; (3) that the Company had to take write-downs of receivables as a result of a recent bankruptcy of one of its customers; (4) that the Company's relationships with retailers were weak; (5) that the launch of the Company's Game Boy Advance products had been delayed; and (6) that as a consequence of the foregoing, defendants' positive statements about the Company's growth and progress lacked in any reasonable basis when made.

On July 12, 2005, Majesco drastically lowered its guidance for its fiscal year 2005. Additionally, the Company announced that its Chief Executive Officer, Carl Yankowski, had resigned his position. This news shocked the market. Shares of Majesco fell $3.33 per share, or 48.33 percent, on unusually high volume, on July 13, 2005, to close at $3.56 per share.

Plaintiff seeks to recover damages on behalf of class members and is represented by the law firm of Schiffrin & Barroway, which prosecutes class actions in both state and federal courts throughout the country. Schiffrin & Barroway is a driving force behind corporate governance reform, and has recovered in excess of a billion dollars on behalf of institutional and high net worth individual investors. For more information about Schiffrin & Barroway, or to sign up to participate in this action online, please visit http://www.sbclasslaw.com.

If you are a member of the class described above, you may, not later than September 16, 2005 move the Court to serve as lead plaintiff of the class, if you so choose. A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the Court must determine that the class member's claim is typical of the claims of other class members, and that the class member will adequately represent the class. Under certain circumstances, one or more class members may together serve as "lead plaintiff." Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff. You may retain Schiffrin & Barroway, or other counsel of your choice, to serve as your counsel in this action.


They lied to their shareholders about profits. Their website also anticipates a 16-18 million dollar LOSS this year: http://www.majescoentertainment.com/press/july1205.php

Not good.....and they were making such awesome games :( [/quote]

[DigitalSpace]

Turns out the bankruptcy rumors are false. Check the original post for a big update.

[Haoie]

Lying to shareholders about profits is a real serious breach of business ethics. Very Enron esque. It doesn't look good for them even if they do keep afloat for now.

[maxlords]

Lying to shareholders about profits is a real serious breach of business ethics. Very Enron esque. It doesn't look good for them even if they do keep afloat for now.

Exactly. They're pretty much fucked. I'd suspect that they're gonna go out of business regardless of whether they declared bankruptcy or not....

[mikeetler]

Lying to shareholders about profits is a real serious breach of business ethics. Very Enron esque. It doesn't look good for them even if they do keep afloat for now.

This isn't a case of a company inflating profits for years on end. It's a case of poor forward looking estimates. They expected Advent Rising and Psychonauts to perform a lot better then they did and expected GBA Video sales to continue at a strong pace. Earnings estimates are done long before the items are even complete, let alone ship to retail. Shareholder lawsuits are also very common any time a major downward revision is done. Here's some recent dates for shareholder class action suits against other publishers for inflated earnings projections:

March 5th 2003 - Activision
March 29th 2005 - Electronic Arts
December 1999 - Take 2
February 2000 - T*HQ
and on, and on and on...

Generally, these cases are settled with the company issuing warrants to affected investors allowing them the option to purchse shares at a reduced price. They rarely have any financial impact on the company other then keeping the share price low after the bad news has already broken and unless a company was looking to sell additional shares to raise working capital, it's will not affect the companies day to day operations. What will cause change is the poor perfoming titles. I would hate to be the person that signed off on $1Mil+ marketing campaigns for two titles that retailers showed no support in.

By the way, I personally think Majesco is a very lowly second rate company, no better then Acclaim, 3DO, Bam! and many other smaller players that have littered the industry with utter crapover the years. They have had some very nice titles, but they're crap to gold ratio is definitely over 90%. I just think too many people are making too many claims and statements without much knowledge on the subject. ;)

-Mike