PSI releases more than 550,000 tons of acid-rainmaking sulfur dioxide (SO2) every year. EPA had proposed last summer that utilities that did not continuously monitor SO, emissions be required to fill in the gaps with the highest levels recorded over the previous 30 days. On Aug. 14, PSI wrote to EPA that the utility was “greatly impacted” by that scheme. Two months later the council told EPA that utilities should be permitted to disregard the 10 percent of hours with the highest values. In PSI’s case, that would lowball emissions by 2,000 pounds per hour. Says Waxman, “A stockholder of one of the three most polluting electric utilities is dictating EPA’s acid-rain rules.”

Council spokesman Jeff Nesbit says, “The witch hunt is starting to get tedious. Hubbard fully disclosed his holdings, which are very small relative to his net worth.” Hubbard declined to comment directly. He might have had a better answer, though, than that there was so little money involved he could be trusted.

title: “Pennies From Heaven” ShowToc: true date: “2022-12-25” author: “John Rosa”

As you probably know. DreamWorks was launched last October by its three founders, who are among Hollywood’s most powerful and most publicized people: Steven Spielberg, possibly the most successful movie director in history; David Geffen, who became a billionaire in the record business: and Jeffrey Katzenberg, who successfully ran the Disney movie studio until he stomped out last year. These three amigos plan to make records, movies and TV shows, and last week announced a joint venture that is supposed to do spiffy interactive entertainment things with Microsoft.

But for those of us who are into numbers, the most interesting news was that DreamWorks has gotten Paul Allen, a confounder of Microsoft, to buy $500 million of stock at a very high price flow high? If all goes as planned, Spielberg, Katzenberg and Geffen will pay $100 million for two thirds of the company, while Allen and the other outside investors will pay a total of $900 million for one third (chart). It’s normal for the guys who start the company and do the work to get a better deal than outside investors. But this is way beyond normalcy. Outsiders paying $900 million for a third of the company Values the whole company at $2.7 billion. That values the amigos’ two-thirds stake at $1.8 billion. That’s $1.7 billion more than they’re paying. Amazing! Without having done any business, Spielberg, Geffen and Katzenberg have a paper profit of $567 million Not bad for six months’ work.

Look at it another way. Disney chairman Michael Eisner, Katzenberg’s old boss, helped turn Disney around, adding about $25 billion to Disney’s market value and being richly rewarded for it. But Katzenberg on paper has made about as much in six months at DreamWorks as Eisner has made in his decade at Disney.

You could maybe justify valuing DreamWorks at $2.7 billion if Spielberg were making “Jurassic Park 2” for the company, or if Geffen were giving it some of his media holdings. But they aren’t. DreanWorks won’t have the rights to the team’s previous hits. It’s a start-up company entering businesses like movies and TV production where you have to put out a lot of money up front, and hope to God you get it hack years later. According to people who decided not to invest in DreamWorks, the company is betting heavily that it will have major successes in animated pictures, where a “Lion King” can make a billion dollars. But this means french warfare with Disney, which dominates the animation biz and claims it’s got key animators locked into long-term contracts.

Yes, DreamWorks’ deal to sell cable rights to its movies to Home Box Office, its TV deal with Capital Cities/ABC and the joint venture with Microsoft are valuable. But they don’t justify a $2.7 billion price on a start-up company with only $1 billion of investors’ capital.

When you ask DreamWorks about its numbers, you end up talking to David Geffen. He agrees with my calculations, but disagrees with my conclusions. He said the company’s business plan is conservative, its founders plan to stick around for at least 10 years arid that DreamWorks has buyers lined up begging for the chance to buy stock on the company’s terms. His best argument: Paul Allen, who’s smart and sophisticated, is paying $500 million to buy stock at DreamWorks’ price. “You can assume,” Geffen said, “that … Paul Allen and all these other people are all smart themselves, and have smart people working for them.”

But even smart people have been known to invest more for fun or glamour than to make a high return. I couldn’t ask Allen what he’s doing, because neither he nor his advisers would talk to me. Among other things, Allen plunked down $75 million or so for his hometown pro-basketball team, the Portland Trail Blazers. That sure looks like a classic vanity investment. He’s raised about 8600 million selling Microsoft stock since the start of 1993, according to CDA/Investnet, and still owns shares worth more than $4 billion. So $500 million is almost play money for him. Other new DreamWorks investors will doubtless pop up soon. Microsoft is making an investment of undisclosed size, and DreamWorkers drop names like IBM the way guests drop names at Hollywood parties.

But regardless of who buys how much stock, there are still certain mathematical facts of life. DreamWorks talks about Allen and other new stockholders aiming for profits “in the high 20s.” Fine. Let’s say our outsiders are expecting to make 25 percent a year, compounded. That means their investment has to double in value every three years. So in six years, DreamWorks has to double its value twice, to $10.8 billion. ID nine years, to $21.6 billion. In 12 years, $43.2 billion. Now, compare those numbers with reality. Paramount, with a huge film library and tons of dandy assets like Madison Square Garden, went for about $10 billion last year. And that was after Viacom’s Summer Redstone and QVC’s Barry Diller got into a wild bidding war. Disney, possibly the most successful media company ever, is worth about $29 billion at its current price.

The numbers work out much better for new investors if DreamWorks does an initial public stock offering at a nice fat price. “We have no plans to do an IPO ever,” Geffen said. But hey, you never know.

With Geffen churning out hit records and Spielberg turning out blockbuster films, DreamWorks will probably be a successful company. And maybe the Microsoft connection will be very profitable. But that doesn’t mean that people paying 1,700 percent more than DreamWorks’ founders paid will make out. Or that you will make out if DreamWorks does an IPO and you buy into it. On Wall Street, they say that no tree grows to the sky. In Hollywood, obviously, the laws of nature must be different.

Hollywood is expensive, but paying 90 percent of the money for a third of the stock seems a tad pricey. That’s what DreamWorks is asking, and will probably get.

Dream Team: INVESTED David Geffen $33.3 million Jeffrey Katzenberg $33.3 million Steven Spielberg $33.3 million Paid $1.5 mil. for each 1% stake Other Investors: Paul Allen $500 million Microsoft, others* $400 million Paid $27 mil. for each 1% stake

  • MICROSOFT HAS TAKEN AN EQUITY STAKE BELIEVED TO BE UNDER $50 MILLION, OTHER EXPECTED INVESTORS INCLUDE CAPITAL CITIES/ABC.