The Securities and Exchange Commission suspended the trading of Georgia-based Medient Studios stock for two weeks Wednesday, citing “questions regarding the accuracy and adequacy of publicly available information about the company.”
It is a far slide for a company that came into Georgia promising to change the movie industry and create a huge studio complex outside of Savannah.
The move will temporarily halt Medient’s efforts to raise money through stock sales, and a suspended “penny stock” such as Medient often does not return to the market. Medient’s stock is not traded on an exchange, but can be bought and sold by brokers.
Before brokers can trade Medient’s stock again, the company will have to provide clear information such as the number of shares available, whether a broker or dealer is associated with the company and company assets. Brokers will have to determine whether Medient has provided the information before deciding whether to trade it again.
The company created a buzz more than a year ago in Effingham County, near Savannah, when it proposed a massive filming complex. Other than some tree cutting and digging of a well, no construction has followed and Medient stock, which was as high as $2.33 last July, was trading for less than a penny a share.
The studio recently fired founder and CEO, Manu Kumaran, who is now suing the company. New CEO Jake Shapiro recently told shareholders the company still planned to forge ahead, though on a smaller scale than initially proposed. The company also recently named former New York Gov. David Paterson to its board.
Shapiro did not reply to an email request for comment.
Medient was promised millions of dollars in local and Georgia tax breaks and incentives. A $3 million state grant was only to be paid after the company created jobs. The Effingham Industrial Development Authority is drilling an $800,000 water well on property where Medient had promised to build a futuristic studio.
An official said the authority would have spent the money on infrastructure at the site regardless of what company and what project came to develop the land.
The news is a cold splash for not only investors but cities and towns across Georgia that have courted Hollywood.
The state has given away hundreds of millions in tax incentives to become one of the top filming destinations outside of California. Hollywood’s shooting schedule and the tax credits helped convince major studio operators such as Pinewood Studios, now operating in Fayette County, to build campuses in Georgia.
Medient, whose films are not well-known to many U.S. moviegoers, said it would shoot horror and sci-fi flicks fast and cheap and in multiple languages for sale to international markets.
As The Atlanta-Journal Constitution reported in May 2013, the company had few assets and limited history as a publicly traded firm. It had no cash on hand, and the company's auditor at the time expressed doubts about its ability to stay afloat.
The company's stock was touted as a can't-miss investment in Internet promotions. One, paid for by a Medient shareholder, called Medient founder Kumaran a "magician" who could spin a dud into "movie gold."
During the past year, Medient issued hundreds of millions of shares, diluting the value of the stock.
The promotions coincided with feverish trading activity in Medient shares and a yo-yoing share price. New investors rushed in allowing old ones to sell at a higher price. When the stock price ultimately tanked, the new investors were left holding the bag.
The SEC warns investors to be cautious about so-called penny stocks.
“Don’t invest in small, thinly-traded companies unless you’re prepared to lose every penny,” the SEC said in an investment advisory on its website. “Because small, thinly-traded companies are usually the most risky investments that you can make, you should always get as much written information as you can from the company and other independent sources.”
Medient officials have not returned messages seeking comment this week through their New York investor relations firm.
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