Coronavirus Updates: Netflix Buys Egyptian Theatre for Post-Pandemic Premiers; TrueCar Lays Off Staff
May 29 2020
Here are the latest headlines regarding how the novel coronavirus is impacting the Los Angeles startup and tech communities. Sign up for our newsletter and follow dot.LA on Twitter for the latest updates.
Today:
- Facing twin threats, TrueCar lays off 40 percent of staff
- Netflix buys Hollywood's Egyptian Theatre to stage post-pandemic events, movie premieres
Facing twin threats, TrueCar lays off 40 percent of staff
<img lazy-loadable="true" src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yMjgzMzYzNi9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTYxMzg5MjUyMX0.Wx6LVxNhx4WbcMFiQkuylQLs5AO2G-_4iQtc61SrdRQ/img.jpg?width=980" id="dc12e" class="rm-shortcode" data-rm-shortcode-id="f06205606520be18d44ae28069fd271e" data-rm-shortcode-name="rebelmouse-image" /><p>Santa-Monice based TrueCar laid off 219 employees Thursday, which represents 40 percent of its workforce. The cuts are partly a reaction to Covid-19 and fewer people buying cars. They are also a response to the loss of a crucial partnership with USAA that expires at the end of September. That deal accounted for 29% of cars sold last year. </p><p>The cuts will save TrueCar $35 million a year, according to an analyst note from JMP Securities. </p><p>While TrueCar would seem to benefit from car shoppers wanting to have less face-to-face contact at dealerships, the company is not immune from the large pressures the industry is facing. With that said, auto sales have bounced back more quickly than analysts anticipated. </p><p>"With website traffic and purchase intent returning to pre-COVID-19 levels for the last two weeks of April and these trends continuing into May (and likely June), auto's recovery has surprised us," wrote Andrew Boone, vice-president at JMP Securities. </p>Netflix buys Hollywood's Egyptian Theatre to stage post-pandemic events, movie premieres
<img lazy-loadable="true" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yMzM1NDU2NS9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTY2MzEwOTAxMn0.60PU8IpHXa9DT43iRyRVP_LJ6iXClwDeIxnac3RWj9U/img.jpg?width=980" id="b2a7d" class="rm-shortcode" data-rm-shortcode-id="d367203996d299149d47684f5b2122e1" data-rm-shortcode-name="rebelmouse-image" data-width="2193" data-height="2495" /> <p>Netflix, which has become one of the biggest content hubs during the pandemic, is planning on a time when moviegoers can return to the cinema. Particularly the Egyptian Theatre in Hollywood, which the streamer just bought. T<a href="https://www.latimes.com/entertainment-arts/business/story/2020-05-29/netflix-egyptian-sale-closes" target="_blank">he Los Angeles Times reports</a> that Netflix closed a deal to buy and renovate the theater for an undisclosed sum from American Cinematheque, an L.A. nonprofit that owns the venue. </p><p>Closing the deal, which reportedly was worth in the tens of millions of dollars, sets up Netflix to hold movie premieres and other events at the Egyptian. Netflix also gets an opportunity to show off some of the company's more cinematic fare at a high-profile theater, thereby setting them up for awards contention before those films start streaming. The company bought New York's iconic Paris Theatre in 2019, Manhattan's last single-screen movie palace.</p><p>"Love for film is inseparable from L.A.'s history and identity," <a href="https://www.latimes.com/entertainment-arts/business/story/2020-05-29/netflix-egyptian-sale-closes" target="_blank">Mayor Eric Garcetti said</a>. "We are working toward the day when audiences can return to theaters — and this extraordinary partnership will preserve an important piece of our cultural heritage that can be shared for years to come." </p>From Your Site Articles
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TrueCar announced Tuesday that Mike Darrow, who has been the Santa Monica company's interim chief executive, now will take over the position on a permanent basis. Analysts say the move adds a measure of stability at a time when many on Wall Street saw it as a possible acquisition target.
Darrow has been with TrueCar for three years, and was put into the top leadership position after former president and CEO Chip Perry retired in May 2019. Prior to that, Darrow served as the company's executive vice president as well as head of TrueCar's ALG subsidiary.
<p>The move adds a dose of support for a company that just a few weeks ago was rumored to be on the auction block after a disappointing earnings report. The stock has bounced around in recent days amidst the wider market volatility, dropping from about $3.66 in earlier February to Tuesday's closing price at $2.34.</p><p>"We believe this adds stability to the organization," said Andrew Boone, an analyst with JMP Securities, in a research note. He kept the company's stock rating at a "market perform." </p><p>A research note by financial services firm BTIG speculated recently that TrueCar, which operates the nation's fourth largest online automotive marketplace, was ripe for an acquisition as soon as the end of this month. "Based on our inbound call volume, we believe many investors are wondering if True is now an acquisition target," wrote analyst Marvin Fong.</p><p>TrueCar has been on a wild ride since serial entrepreneur Scott Painter founded the company in 2004.<br/></p><p>It quickly became one of L.A.'s hottest startups after it appeared to be able to disrupt the half-century-plus relationship between consumers and auto dealerships. But dealerships were not about to go quietly, and in 2012, thousands of dealers exited the TrueCar network amidst complaints about bidding wars that meant they were losing money on transactions. </p><p>Still, the company went public two years later and shares have sunk from a high of $25.00. </p><p>In 2018, changes to Google's search algorithm <a href="https://www.fool.com/investing/2019/03/18/truecar-is-ready-to-re-accelerate-revenue-growth.aspx" target="_blank">caused a steep decline in TrueCar's website traffic</a>. Just as the company was recovering from that and improving its SEO, USAA recently announced it would end its lucrative partnership, which brought in 29% of TrueCar's unit sales, in October.</p><p>USAA remains TrueCar's fourth-largest shareholder with about 9 million shares, which represents 8.5% of the stock.</p><p>Darrow said in a statement Tuesday that he's "proud of the way the company united to launch our new brand and consumer experience earlier this year, which was no small feat." </p><p>"I look forward to working with the team as we continue to innovate and deliver a modern and world-class car buying experience that appeals to consumers and dealers alike," he added.</p>
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The struggling Santa Monica-based TrueCar, which operates the nation's fourth largest online automotive marketplace, is ripe for an acquisition as soon as the end of next month, according to a new research note from the global financial services firm BTIG.
"Based on our inbound call volume, we believe many investors are wondering if TRUE is now an acquisition target," wrote analyst Marvin Fong.
<p>BTIG says the answer is a strong maybe, given that TrueCar has several attributes of an appealing takeover target, including an empty CEO seat, a small group of big shareholders who own a considerable number of shares, and an attractive set of data on shoppers that would be useful to bigger companies.</p><p>BTIG thinks a takeover could happen in the next few weeks because TrueCar's board has said it expects to name a permanent CEO by March 31, which the bank believes would be seen as a sign the company is not for sale. Even if a deal does not happen soon, BTIG puts the odds at better than 50/50 that TrueCar is not a standalone company within the next 36-48 months. </p><p>"We see the merits of this idea as the overall listings space is stagnant and cost synergies could be meaningful, making consolidation a potentially value accretive route," Fong wrote.</p><p>TrueCar has been on a wild ride since serial entrepreneur Scott Painter founded the company in 2004.<br/></p><p> It quickly became one of L.A.'s hottest startups after it appeared to be able to disrupt the half-century-plus relationship between consumers and auto dealerships. But dealerships were not about to go quietly, and in 2012, thousands of dealers exited the TrueCar network amidst complaints about bidding wars that meant they were losing money on transactions. </p><p>Still, the company went public two years later and shares have gone from a high of $25.00 to under $3 a share this week. <br/></p><p>Michael Darrow has served as TrueCar's interim President and CEO since Chip Perry stepped down in June. Perry had been in the post since the end of 2015, when Painter departed. <br/></p><p>In 2018, changes to Google's search algorithm <a href="https://www.fool.com/investing/2019/03/18/truecar-is-ready-to-re-accelerate-revenue-growth.aspx" target="_blank">caused a steep decline in TrueCar's website traffic</a>. Just as the company was recovering from that and improving its SEO, USAA recently announced it would end its lucrative partnership, which brought in 29% of TrueCar's unit sales, in October.</p><p>USAA remains TrueCar's fourth-largest shareholder with about 9 million shares, which represents 8.5% of the stock.</p>
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