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Judge David Ryan • Location: Natick, MA
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The HSX Report -- 5/28/07
May 28th, 2007 8:01PM

Today's topic: The Monday Afternoon Hangover

Well, the Memorial Day Weekend numbers are in for Pirates of the Caribbean: At World's End... and from an HSX standpoint, it's a bloodbath. Although the film did well, it didn't do nearly as well as projected, leading to a downward adjustment of almost 25%. Which equates to a whopping H$43.93 downward adjust. From a personal perspective, that's H$2.19M of my portfolio value wiped out in an instant. Ouch.

More important for HSX traders is what this means for the 2007 summer blockbuster season. As I wrote before, Pirates should serve as a bellweather for the season. So what have we learned? I think we've learned that Spider-man 3 and Shrek the Third, whose B.O. results were roughly in line with Pirates, probably show us what to expect for the rest of the year. The strong openers should adjust to the H$300-350 range, equating to opening weekend tallies in the $110M range. A H$400 stock probably isn't on the horizon this year, although Transformers -- which shouldn't suffer from possible sequel-itis like the aforementioned three films -- might have that sort of potential.

Also important for HSX purposes -- although it's a short run issue and not a seasonal bellweather -- is the second weekend performance of Shrek the Third. It took in a four-day total of $69M, including $53M in the Friday-Sunday period. Typically, a film's box office falls by anywhere between 40-60% in its second weekend; Shrek 3 is apparently no different, showing a 56% dropoff. What does this mean for HSXers? It means that SHRK3 is still on pace to delist in the H$320 range, so there's no current arbitrage potential there.

The other new opener, Bug, finished just where HSX predicted it would, at about $4M in box office.

What to do when you've just lost 25% of the value on your H$400 stock (and the gain you could have had on the call option, had you sold it on Friday)? Pick yourself off, dust yourself off, and keep writing your HSX blog, that's what!

Back to the daily grind tomorrow. Excelsior!

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