The rise and fall of Hollywood hedge fund operator Benjamin Waisbren is detailed today in a long article in Bloomberg today. Waisbren was the front man for Stark Investments Hollywood movie, and was axed after the firm sunk money into last year's ill-fated Poseidon."
Most of Waisbren's plan, particularly the part about being smarter about borrowing money to reduce the cost of capital sounds pretty good. But the description of Waisbren's partner Jack Kavanaugh using investment banking style business modeling techniques is pretty entertaining:
Like Waisbren, Kavanaugh has devised a plan to make Hollywood pay for investors. Taking advantage of the relationships he developed investing on behalf of Hollywood heavies, Kavanaugh compiled as much proprietary historical data as he could about movie returns.
He attaches a numerical value to each participant in a film -- the talent, the director, the screenwriter, the producer and so on -- based on their historical returns, and then he runs the numbers through Monte Carlo simulations to figure out how much the movie will sell for in foreign territories and, ultimately, the most prudent amount to invest in the budget.
For instance, his models priced a planned movie featuring martial-arts action stars Jet Li and Jackie Chan at $70 million, partly because the two stars would be appearing together for the first time. Similarly, a prequel to the 1987 hit ``The Untouchables,'' directed by the first film's director, Brian De Palma, also scored $70 million from Kavanaugh's models.
We can't be the only folks who read this and thought, "Why would anyone even bother getting out of investment banking and going to Hollywood if they're still going be running Excel spreadsheet models all night?" Except for the whole sleeping with starlets thing, we mean.
Hedge Fund's `Poseidon' Misadventure Drops Curtain on Dealmaker [Bloomberg]