[Body_Shots]

Stock plunge doesn't worry IFL chiefs
Wednesday, June 27, 2007

By DUNSTAN PRIAL
STAFF WRITER

In January, after several generally upbeat mentions in the national media, shares of the International Fight League soared to an intraday high of $17.

Five months and two ugly Securities and Exchange Commission filings later the shares are hovering at about $1.

At the stock's peak, a handful of company insiders, each of them North Jersey businessmen, saw their stakes swell toward $100 million and above.

Stock owned by IFL co-founder Kurt Otto, an architectural designer and real estate investor from Haworth, was worth nearly $158 million; co-founder and IFL chief executive Gareb Shamus, a publishing entrepreneur from Tenafly, held shares worth $126 million; and Richard Kurtz, president of the Englewood Cliffs-based real estate management company Kamson Corp., owned stock valued at $83 million.

Today Otto's stake stands at $9.3 million, Shamus' at $7.4 million and Kurtz's at $4.9 million. None of the three has sold any shares. The stock closed Tuesday down 3 cents at 97 cents.

Shamus said in a recent interview that the company's stock price is irrelevant to the day-to-day business of building a successful brand around the first team-oriented mixed martial arts league.

"I only care about building a great business. Over time the marketplace will determine the value of that business," said Shamus.

That business will presumably include profits, but IFL executives say it's too early to project when the company might start making money.

In 2006, the IFL's first full year in operation, the company lost $9.6 million while taking in $2.4 million in revenues, according to SEC filings. All of the revenues, which included $1.4 million for television rights, $672,000 in box office receipts and $273,000 in sponsorship fees, were derived from the six IFL competitions held last year.

The league's expenses were dominated by $6.3 million to put on the live events, costs that included $2.1 million for the fighters, $1.6 million for travel and miscellaneous expenses, another $1.6 million for television production costs and $1 million for advertising.

In May, the IFL reported a quarterly loss of $7 million for the period ending March 31.

Shamus said he prefers to focus on the IFL's progress since it was founded two years ago.

The league is now made up of 12 teams with plans for future expansion, he said. In addition, two television deals, one with the Fox Sports Network and the other with MyNetworkTV, allow 2 million viewers a week to watch the league's matches. And partnerships were recently signed with USA Wrestling, the governing body for U.S. amateur wrestling, and the USO. Under the latter partnership, the IFL will conduct training sessions with U.S. military personnel.

The league's playoffs will be held in August at the Meadowlands, serving as a sort of homecoming for Shamus and Otto.

Shamus said factors unrelated to the IFL's finances caused the stock price to soar earlier this year.

Shortly after the IFL's shares began trading publicly in November via a reverse merger with a failed biotechnology company, the growing popularity of mixed martial arts was featured on "60 Minutes" and on CNN, he recalled.

In both pieces, the IFL was mentioned as a viable rival to the sport's largest sanctioning body, Ultimate Fighting Championship.

According to Michael Keefe, the IFL's president of legal and business affairs, at the time the positive stories ran there were less than 1 million shares trading publicly. The positive publicity created a strong demand for a small supply of stock and the price rose to $17, he explained.

After hitting its high on Jan. 25, the stock began a gradual slide until April 2, when the company published its first annual report in which the 2006 losses were revealed. The next day the stock fell 30 percent.

Six weeks later the quarterly losses were reported and the stock took another hit.

Finally, on May 29 investors who had bought into the league in December through a $24 million private placement deal were able to sell their stock, flooding the market with an additional 20 million shares. The next day the stock lost more than half its value, falling from $2.90 to $1.22.

Despite the plummeting stock price, Shamus said none of the company's core investors have sold any of their shares, a point confirmed by SEC filings.

Kurtz, an important financial backer as the league was getting off the ground, said he's "concerned" about the stock price, but confident Shamus and Otto are putting in place an effective business plan.

"I think they're about halfway there," he said.

All new sports leagues face an uphill battle, but analysts like Robert Routh of Jefferies & Co. in New York say the IFL faces an additional hurdle due to the violent nature of its competition.

Indeed, the league is banned from competing in New York, home base to one of its teams, the Pit Bulls.

Shamus said mixed martial arts advocates from a range of entities are lobbying the state to sanction the sport. And in any case, being sanctioned in New York "would certainly help, but it hasn't hurt us either," he said.

In online investor chat rooms, views on the future of the company and its stock price run the spectrum. One investor and MMA fan counseled patience on a Yahoo site, noting that "a buck and change to buy into the only competition [Ultimate Fighting Championship] has" is a bargain.

Meanwhile, another investor on the same site cautioned, "When a stock goes up on hype and not good earnings there is always a bad ending."
E-mail: prial@northjersey.com
http://www.northjersey.com/page.php?...Y3dnFlZUVFeXky

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