Chasing Stars in Hollywood

After formally submitting the IPO application, the prospectus of Daenerys Entertainment Group was immediately published on platforms such as the Egret portal, the SEC website, and the Daenerys Entertainment website.

The first version of the prospectus provided a detailed introduction to Daenerys Entertainment Group's business structure, revenue data, equity structure, development prospects, and other relevant information required for an IPO. Additionally, it included key information of interest to investors such as the chosen exchange, underwriters, fundraising size, and stock issue price range for the IPO.

For those interested, the business structure and revenue data of Daenerys Entertainment were not secrets. Thus, most potential investors focused on the equity structure and development prospects presented in the prospectus.

After the March internal stock subscription and senior management stock rewards, the total share capital of Daenerys Entertainment Group amounted to approximately 2.113 billion shares, with Simon personally holding 91.7% of the shares, equating to 1.937 billion shares.

There had been much speculation regarding Daenerys Entertainment's internal subscription and reward scheme. Most people did not expect Simon to transfer or reward such a significant 8.3% of Daenerys Entertainment's shares to the company's employees.

Based on the prospectus's indicated issue price range of $18 to $20, even at the minimum value of $18, the total value of the 176 million shares transferred to employees exceeds $3 billion.

Daenerys Entertainment plans to issue 250 million new shares in this IPO, with an expected fundraising total of $4.5 billion, calculated at the minimum value of $18 per share.

According to some media reports, besides the stock rewards for senior management, the shares subscribed by internal employees were sold at a significant discount, possibly only half the actual value of the shares. Essentially, Simon Westero effectively gifted over $1.5 billion in cash to Daenerys Entertainment Group's employees.

This $1.5 billion, based on Daenerys Entertainment's current total workforce of 29,000, averages out to a reward of $51,000 per employee, which exceeds the annual salary of most wage earners in the USA.

In 1993, the per capita annual income in the USA was only $31,000.

Of course, the actual rewards and subscription distributions were not equal.

According to the disclosed figures in the prospectus, aside from Simon Westero's 91.7% high absolute controlling share, the next largest shareholder is Daenerys Entertainment CEO Amy Pascal, who owns 35 million shares, equating to a 1.65% shareholding.

Even at the minimum issue price of $18, the total value of Pascal's shares amounts to $630 million.

This is obviously a very conservative estimate.

After the official listing, the total value of these shares could easily exceed $1 billion.

Moreover, according to some media reports on Amy Pascal's compensation contract, since joining Daenerys Entertainment, this female executive has accumulated hundreds of millions of dollars in salary. With investment guidance from an investment genius like Simon Westero, even if Pascal invested half of her salary, combined with her recent stock rewards, her personal net worth could have already exceeded $1 billion, making her another billionaire in the USA.

Following Amy Pascal, the third-largest shareholder is another female executive.

Nancy Brielle holds a total of 7 million shares.

This petite female executive, primarily responsible for Daenerys Entertainment's peripheral products, video games, and video rental chains, has achieved remarkable results in recent years. However, in a society that still values men more, Nancy Brielle receiving the second-largest shareholdings, just behind Amy Pascal, surprised many.

To address some people's doubts, Daenerys Entertainment's official website published a more detailed list of stock rewards and subscriptions.

Out of Nancy Brielle's 7 million shares, 5 million were rewards, and 2 million were internal subscription shares.

All 35 million shares owned by Amy Pascal were rewards; this CEO of Daenerys Entertainment voluntarily transferred her 3 million subscription shares to other employees within the group.

Robert Iger, co-president of the group responsible for Daenerys Entertainment's television business, received a total of 4.5 million shares, with 3 million as rewards and 1.5 million from subscriptions.

The global operations vice president responsible for the global distribution of Daenerys Entertainment's films, Mark Belford, Highgate Films president Ella Deutschman, and New World Pictures president Danny Morris, each held 3 million shares, with 2 million as rewards and 1 million from subscriptions.

Although the total value of the shares held by Nancy, Iger, Mark, Deutschman, and Morris is far less than Amy's, it still surpasses the salaries of most Hollywood executives of the same level. Even at the minimum value of $18 per share, the total value of shares held by the five core executives exceeds $54 million.

Across the USA, executives who can receive such substantial rewards are rare.

Due to Daenerys Entertainment Group's relatively flat corporate structure, apart from Simon, the actual controller, and Amy, the CEO, other executives cannot have much power, so the returns for Nancy and the others are not as high as Amy's.

This distribution rule is common in most enterprises.

The head takes the largest share, and the next tier of executives' income is significantly lower.

Additionally, Amy Pascal's substantial reward is partly due to her status as a founding member of Daenerys Entertainment, while other core executives joined after the company's rise.

Often, the earlier you join a company, the more you gain.

Like Microsoft's early core executive Steve Ballmer, who accumulated a net worth of tens of billions later, while Satya Nadella, the Indian-origin CEO who led Microsoft back to the trillion-dollar market cap peak decades later, could only earn tens of millions of dollars annually.

Egret is the same now.

Jeff Bezos and two others are expected to receive 5% of Egret's shares after their contracts expire, while Alice Ferguson, who successfully turned Egret's Big Three into the Big Four by managing the e-commerce business, can only receive up to 3% of the shares before Egret's IPO, despite Simon's recognition of her capabilities.

In Simon's mind, Ferguson's abilities are much stronger than two of the original Big Three, Tim Berners-Lee and Carol Bartz, almost on par with Bezos, but that's how the world works.

Back to Daenerys Entertainment, Tom Pollock, the former president of Universal Pictures who became president of Daenerys Pictures after the acquisition, received the least shares among the seemingly core executives, only 1.5 million shares, with 500,000 as rewards and 1 million as internal subscriptions.

The circle knows that this executive, in charge of Daenerys Pictures, the most crucial of Daenerys Entertainment's three labels, has very low authority.

Most of Daenerys Pictures' decisions are made directly by Simon and Amy. Tom Pollock, despite his title, acts more like an executor, and he joined Daenerys Entertainment late, not really counting as a core member of Daenerys Entertainment Group.

Receiving 1.5 million shares might be Simon Westero's way of preserving the face of this veteran Hollywood executive.

Outside the core management, high-level executives like Pixar president John Lasseter, Daenerys Effects president Mark Silvestri, Marvel Entertainment chairman Stan Lee, and Fashion TV president Anna Coleman collectively received an additional 13.5 million shares in rewards and about 7 million shares in subscriptions.

In summary, Simon Westero transferred a total of 176 million shares, of which 63 million were rewards, mainly for Daenerys Entertainment's department heads and above. 113 million shares were subscriptions, with the management taking 14.5 million shares, leaving most for employees at various levels.

In essence, the main difference between reward and subscription shares is tax.

High-level executives need to pay income tax on their reward shares.

Subscription shares do not require immediate tax payment, only capital gains tax when sold in the future.

Moreover, since the internally subscribed shares are new issues, Daenerys Entertainment doesn't need to pay taxes; the raised funds must be used as cash reserves for the company's development, not allocated to Simon personally.

In reality, through the internal stock subscription of 113 million shares, Daenerys Entertainment only recouped $1.09 billion in funds. This means that Simon's actual reward to Daenerys Entertainment Group employees far exceeds the $1.5 billion estimated by the media.

Simon fundamentally does not believe in using money to buy loyalty. He believes in rewarding based on contribution.

The rapid development of Daenerys Entertainment Group over the years wouldn't have been possible without the collective effort of the group, which Simon recognizes and generously rewards accordingly.

However, he has no intention of relinquishing control over Daenerys Entertainment.

The prospectus specifically states that Daenerys Entertainment will adopt a dual-class share structure. After the equity adjustment in March, Simon's 1.937 billion shares of Daenerys Entertainment will all be Class B shares with ten times the voting rights, while the 176 million shares held by Daenerys Entertainment employees are Class A shares with one-tenth the voting rights. The 250 million new shares planned to be issued in the IPO will also be Class A shares with one-tenth the voting rights.

After the expected listing in late June or early July, the total share capital of Daenerys Entertainment Group will expand to 2.363 billion shares, with Simon's personal shareholding proportion falling to 81.9%, but his voting rights will remain at 97.8%.

Even if Simon decides to sell some of his shares in the future, he has the right to convert Class B shares to Class A shares before the sale. Thus, as long as Simon doesn't voluntarily relinquish control, even if the Westero family's

 shareholding in Daenerys Entertainment Group drops below 10% in the future, they can still maintain absolute control over the company.

Due to recent public opinion, the exposure of Daenerys Entertainment's dual-class share structure will inevitably lead to some criticism.

Simon remains indifferent.

Whether it's Cisco, AOL, or Daenerys Entertainment, Simon's dual-class share structure operations are entirely within the rules.

Even if some are dissatisfied or future authorities amend relevant laws, according to the American legal principle of not applying laws retroactively, many established facts cannot be changed.

Since the announcement of Daenerys Entertainment's upcoming IPO, there has been a prevailing view in the industry that this entertainment giant, which has already captured about 40% of Hollywood's core movie business, has limited growth potential and is not optimistic about its long-term development.

Recent facts have proven this view to be entirely wrong.

For instance, Daenerys Entertainment's EA subsidiary's social game "Happy Farm" recently achieved phenomenal success, demonstrating significant growth potential in the game business beyond the movie business.

Daenerys Entertainment Group's Easter week release was the third installment of the "Teenage Mutant Ninja Turtles" series, "Teenage Mutant Ninja Turtles 3," which opened on April 1 and grossed $21.62 million in its first week. Despite the production cost of $40 million and a marketing budget of $20 million, the $21.62 million opening was below expectations.

However, an estimated $80 million North American total box office provides a decent conclusion for the series. Combined with overseas box office revenue, the film can easily recoup its costs and achieve profitability through global theatrical release.

Simultaneously with the movie release, the Nintendo console platform also launched a new "Teenage Mutant Ninja Turtles" game on April 1. The first-week sales in North America and Japan totaled 116,000 copies. Although it couldn't match the over 5 million copies of the first "Teenage Mutant Ninja Turtles" game, the estimated global total sales for this sequel are around 2 million copies, still a significant success.

With strong performances in online games, console games, and EA's dominance in PC strategy and sports games, Daenerys Entertainment's future in the video game industry, predicted to rival the movie market in scale, looks promising for continued high growth.

Additionally, Daenerys Records' Backstreet Boys released their self-titled album "Backstreet Boys" on March 25, with initial US sales of 270,000 copies in the first week and 320,000 copies in the second week. The album is expected to reach 15 million sales in the US alone and possibly surpass 20 million worldwide.

Simon personally followed the formation and promotion of the Backstreet Boys since last year, finally seeing results after a year of effort.

The success of the Backstreet Boys not only solidifies Daenerys Records in mainstream pop music but also proves the feasibility of mass-producing Teen-Pop artists.

The sudden popularity of the Backstreet Boys also adds to Daenerys Entertainment's IPO efforts, demonstrating the group's potential for significant growth in the previously weaker music sector.

The prospectus highlights the development prospects of Daenerys Entertainment, focusing on the high-growth potential of the game and music businesses and emphasizing the company's active layout in the television business.

In content production, Daenerys Entertainment has pioneered reality TV trends and launched popular series like "Seinfeld" and "Desperate Housewives."

On the television network front, Daenerys Entertainment fully owns the basic cable network USA with over 90 million subscribers and recently launched Fashion TV, a specialized fashion channel that has quickly expanded across North America and Europe, showing rapid performance growth.

Additionally, Daenerys Entertainment's prospectus states that post-IPO, the company will further expand into the television field.

The description is clear.

The lifting of the federal media integration ban is inevitable, and Daenerys Entertainment is undoubtedly the most capable of acquiring the traditional big three public TV networks.

Wall Street analysts predict that Daenerys Entertainment's IPO largely aims to pave the way for future acquisitions of major public TV networks, raising funds and reducing political and commercial obstacles through public listing.

Hence, considering the ongoing high growth in Daenerys Entertainment's gaming and music businesses and potential future expansion into television, the entertainment giant can maintain considerable high growth for a long time.

Moreover, Daenerys Entertainment's film business has not reached its peak.

In just the US, the movie market has consistently grown by over 10% annually, with Hollywood's box office bombs, primarily from Daenerys Entertainment, dominating global markets.

With Daenerys Entertainment owning powerful assets like Daenerys Effects, Pixar, and Marvel, it can continue growing its core film business.

Combined with its investments in consumer peripherals, theme parks, cinema chains, and video rental chains, the first version of the prospectus confidently predicts a 20% to 30% annual revenue growth for at least the next five years.

This forecast is conservative.

After acquiring MCA, Daenerys Entertainment achieved 37% and 35% annual growth rates in the past two years, even with a strong core film business.

Thus, without considering potential further expansions into major public TV networks, Daenerys Entertainment can likely maintain over 30% annual revenue growth for the next five years.

Despite some media and Wall Street analysts still insisting that Daenerys Entertainment has reached its growth ceiling after submitting the prospectus, most potential investors understand the true value of Daenerys Entertainment's stock.

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