‘Why would we put ourselves in danger?’

DNEG drew attention on Thursday when canceled a $1.7 billion deal with a SPAC that would have made the VFX giant public. But CEO Namit Malhotra says he’s not the only one who recognizes that with the market’s incredible volatility, taking that step today simply wouldn’t make sense.

“Why would we put ourselves in harm’s way? … Our business couldn’t be better,” Malhotra told TheWrap on Thursday. “Whether you’re an entertainment company or a technology company, you’re going to have to deal with capital market volatility, and I think it’s written on the wall. Because at this time, there is no IPO, SPAC or financing in progress. No one ventures, because no one knows what tomorrow will be like in the world of investors. Everyone is cautious.

DNEG, the London-based visual effects company that won Oscars for “Tenet” and “Dune” and just worked on the final season of Netflix’s “Stranger Things,” first announced its deal with SPAC Sports Ventures Acquisition. Corp. in January. For Malhotra, the wheels began to turn on the cancellation of the deal earlier this week, when DNEG released its earnings for the fiscal year ending March 31. The company boasted of reaching $409.3 million in revenue that exceeded expectations and also reflected a record number of visual effects. business for the company.

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That business includes signing a new VFX deal with Netflix, partnering with Alcon Entertainment on a co-production of the upcoming “Garfield” animated film, and even an Indian film called “Brahmastra” which has racked up more than 25 million views for its trailer in 48 hours and on which Malhotra is a producer.

DNEG is also in production on other properties including HBO’s “The Last of Us” series, Netflix’s “Knives Out” sequel “Glass Onion,” DC’s “Black Adam” and Sony’s “Bullet Train.”

Malhotra has reiterated since this morning’s announcement that the decision to cancel the deal was mutual due to “unfavorable markets.” This despite the fact that DNEG ended up paying its prospective partner a $1.5 million termination fee, as revealed in an SEC filing and confirmed by TheWrap.


“Stranger Things 4”/Netflix

“You don’t want to take a whole new route, you know, there’s a big storm out there and you want to say, let’s fly into the storm. Why would you do that? No need, everything is fine. Just wait for the right moment and do what you’re supposed to do,” Malhotra said. “We were making a decision to really do what’s best for our business. And doing it to each other in a friendly way and saying, ‘Hey guys, we’ve all spent a lot of money trying to get here, but as far as we’re concerned, as a company, I don’t need to do this. [with] where is the company?

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Malhotra says that in the short term, little will change for DNEG’s immediate business plans, but they have big long-term ambitions to expand their operations into both gaming and the future of the metaverse and Web3. Pushing to go public might have sped up that process, but Malhotra feels the larger market shocks from the pandemic, the Ukraine war and other factors are causing even the biggest tech companies to “take a breather” when it comes to of investing billions in the metaverse.

And because DNEG has frequently partnered with the largest technology and entertainment companies on their visual effects needs, their business model is such that they can “take the lead from our key customers” and see how companies like Amazon respond. , Disney or Netflix. to the next evolution of the web.

“It kind of automatically gives us the confidence or the impetus to do it,” he said. “And that’s something that in the current timeline, everyone has been figuring out, ‘Let’s focus on what we’re doing right now.'”

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However, Malhotra added that the fact that the SPAC deal has been canceled does not rule out the possibility of DNEG going public one day, perhaps with just an IPO, and having done the legwork and gone through the processes with the SEC. today has paved the way for what they could do in the future.

“Frankly, to be able to go public again, it actually becomes a lot easier because, fortunately, through this process, the investors that we have spoken or discussed with have seen the company perform through the ages.” Malhotra said. “If anything, it can help build a certain track record of credibility from the company and management because they’ve seen it.”

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