Wizard World Crowd Funding Investment Plans Could Have Big Impact

The parent company of Wizard World conventions is taking to the relatively new public crowd-funding method of raising money by selling stock shares. The end result of this effort could be the creation of essentially two tiers of attendees, with investors getting perks like early entry and special lines for photo ops, and standard ticket buyers getting relegated to second-class status.

Back in November 2019, Wizard Entertainment Inc. filed papers with the Securities and Exchange Commission stating its plans to sell up to 4 million shares of stock at $2.50 per share with a goal to raise $10 million. However, the parent of the Wizard World conventions isn’t selling the stock through any public stock market such as the New York Stock Exchange, but one of the new crowd-funding stock markets, StartEngine CrowdFunding Inc. And it turns out StartEngine was co-founded by the current chairman of Wizard Entertainment, investor Paul Kessler.

First, some history. Back in 2016, Wizard World was teetering on the brink of shutting down, according to reporting from Bleeding Cool back then. That followed after the company sued one of its co-founders for theft. But the horrible 2016 ended on an up note for Wizard World, as the co-founder of investment firm Bristol Capital Advisors, Paul Kessler, invested $2.5 million in the company in December 2016 via the firm’s Bristol Investment Fund.

Since then Wizard Entertainment has trimmed down the number of cons it runs a bit although in 2018 it still operated 14 conventions according to its SEC filing. And, at the beginning of 2016, Kessler added public crowd funding via sales of company stock shares to the offerings of StartEngine, taking advantage of the changes to investing rules from the SEC that began in 2012.

That brings us up to late 2019 and the SEC filing about Wizard Entertainment selling shares via crowd funding.

One of the best things about having a background in business reporting is that I can work my way through an SEC filing. According to the Nov. 2019 filing, the primary goal for the stock shares sale is to pay back the investment from Kessler’s Bristol Investment Fund, an investment vehicle for Bristol Capital Advisors. This is common for almost any sale of shares of a company to the public after an investment from a venture or investment firm. But the follow-on uses are of particular interest, and include “production of international shows and conventions” and the development of “a fixed site, pop-culture installation.”

Since Kessler became chairman following the $2.5 million investment, Wizard Entertainment has still run at a loss. But the filings shows that through cost savings and slight increases in revenue, the amount of yearly loss has been declining every year. That has led the company to no longer say it is running at a state of “Going Concern,” meaning it may not have enough on-hand funds to continue to operate past a couple of fiscal quarters. The company has been in a “Going Concern” state since 2016, so that is a pretty impressive accomplishment.

I was surprised to see that StartEngine, like any personal crowdfunding site, also offers perks to its investors. The minimum investment level is $500 and that gets the investors up to four “Owner’s VIP Packages” able to be used at any time. These include free badges, show floor discounts and the like, but they also include “Owner’s Only check-in” and “Owner’s lines for Autographs and Photo Ops” and “Owner’s seating” at panels and events.

The potential outcome of the crowd-funding effort by Wizard Entertainment is to create an elite tier of attendee beyond any benefit given by purchasing even a VIP badge for a single Wizard World convention. This could have a negative effect on the goodwill of the regular attendees, something that might reverse the growth shown over the past few years in convention revenue. From a business standpoint, the capital raised from the stock sale may offset this possible downturn — if it even happens — but it is a finite fund source. If it does damage the con attendance revenue, that could be an ongoing loss of revenue for a one-time benefit.

This fairly new way of funding a company arose from a desire to increase the ways startups — mostly tech companies — could raise capital beyond private investors or seed stage investment groups. Time will tell if the crowd-funded sale is good for Wizard World or not. It’s possible the StartEngine campaign may not even raise the minimum $2.5 million needed to pay back the Bristol investment. It’s also possible we are seeing the beginning of a new trend in convention financial operations.