Video game publisher Acclaim Entertainment, which has been hampered by a lack of hit titles, filed for bankruptcy liquidation on Thursday after failing to line up new financing.
The move was not a surprise. Acclaim, one of the oldest brands in the industry, has been known as much for failures like "Turok: Evolution" and controversial titles like "BMX XXX" as it has for its successes in the highly competitive game industry.
The company, which filed for bankruptcy to liquidate its assets under Chapter 7 of U.S. Bankruptcy Code, has also faced lawsuits from some of its top licensees, including ones from teen superstars Mary-Kate and Ashley Olsen and biking legend Dave Mirra.
Acclaim is the second well-known company in the business to go bankrupt in recent times, after 3DO Co. in 2003.
It was not immediately clear what would happen to Acclaim's properties, including upcoming games like "100 Bullets" as well as new entries in the "Worms" franchise.
Rival developers are always looking to acquire popular games, and companies such as Majesco Holdings, Atari and Take-Two Interactive Software may be interested in Acclaim's roster, according to Michael Pachter, an analyst with Wedbush Morgan Securities.
But opinions differed on the value of those assets.
"Games like 'Juiced' and 'Red Star' are worth quite a bit," Pachter said. "Majesco and Take-Two have a strong distribution presence, so they would be able to get them out quickly."
On the other hand, RBC Capital Markets analyst Stewart Halpern noted that with 3DO's liquidation, none of its franchises sold for much more than $100,000.
"If that's any guide, then it doesn't seem like the asset sale story is going to be an exciting one," he said.
Acclaim attorney Jeff Friedman said a trustee has been appointed and charged with selling Acclaim's assets, including several titles that are ready to market.
Still, he said, "the games that are in the middle of development are more problematic because it is not clear that there will be money to finish those games."
According to its annual report filed with the U.S. Securities and Exchange Commission, the company's assets as of July 1 totaled $47.3 million, with liabilities of $145.3 million.
Friedman said at least one creditor was owed more than $20 million, but he did not know the name of that person or entity.
Acclaim in early July said it faced bankruptcy unless it could negotiate a new credit facility. The company reiterated that warning in late August.
"Negotiations with a proposed lender to replace the company's former primary lender, GMAC Commercial Finance, had terminated, and the company's credit facility with GMAC expired on Aug. 20 and was not extended," Acclaim said in a filing with the SEC.
RBC analyst Halpern said that while Acclaim's demise may be its own fault, other smaller developers in the $10 billion interactive-game industry must struggle to compete in the face of rising marketing and developing expenses.
"The numerous errors and misjudgments that Acclaim made along the way make this a company specific situation," he said. But there is no question that the cost of doing business continues to increase, making it harder for smaller companies to compete broadly.
Shares of the Glen Cove, N.Y.-based company, which was founded in 1987, peaked at more than $30 a share in late 1993 but last broke $5 in mid-2002. They have traded below $1 since last September. Over-the-counter Pink Sheets of Acclaim traded at around 2 cents on Thursday.
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