Hollywood effects house snubbed by Wall Street

By Paul Bond

LOS ANGELES (Hollywood Reporter) - Digital Domain is finding out that powerful Hollywood investors like Michael Bay and high-profile projects like "Speed Racer" nowadays don't amount to much on Wall Street.

The special-effects house tried last week to go public, offering 6 million shares priced around $13 apiece, though the IPO was met with healthy skepticism.

Hints that the IPO is a tough sell can be found in the prospectus, the key line being: "Since 2004, we have been unable to generate revenues sufficient to be profitable."

Indeed, in 2007 the company lost $19.9 million.

Bay, through his investment firm Wyndcrest Holdings, purchased Digital Domain two years ago with the goal of turning it into "an effects powerhouse."

The director of such blockbusters as "Transformers" and "Armageddon" also wants Digital Domain to make video games and even compete with Disney/Pixar and DreamWorks Animation by taking some ownership in the films it makes.

But Digital Domain acknowledges that making money in these endeavors is no easy task. In its prospectus, it calls the visual effects and animation industry "very competitive," while the video game industry is "intensely competitive."

So far, it seems that the company, which is seeking to raise $68 million in its IPO, has set too lofty a goal at a time when Wall Street prefers profits to potential.