DreamWorks Animation Stock Hits 52-Week Low as Paramount Animation is Launched

Paramount Pictures

Investors didn't take the creation of a rival studio from DWA's distribution partner very well.

Shares of DreamWorks Animation dipped to a 52-week low in mid-day trading Wednesday before slightly recovering, likely a reaction to Paramount announcing the creation of Paramount Animation.

The new CGI animation studio intends on -- starting in 2014 -- releasing self-produced $100 million movies in the vein of its Rango, which took in $240 million worldwide.

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Paramount’s announcement left investors guessing Wednesday what effect the new studio will have on DWA’s business, given that Paramount is its distribution partner through the end of 2012.

DWA’s stock fell 3 percent Wednesday to $20.12 after rising off its 52-week low of $19.76 earlier in the day. The dip left the company with a $1.7 billion market capitalization, about $200 million less than Imax and $130 million less than Regal Entertainment Group.

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Sources have told The Hollywood Reporter that Paramount has offered DWA a one-year extension to fill the gap between distributing CGI films from DWA and the ones from its new Paramount Animation division, though DWA chief executive Jeffrey Katzenberg is holding out for better terms.

The two can also strike a longer deal, of course, though the creation of Paramount Animation gives Paramount more leverage than it had previously, given that it will have CGI-animated films to distribute in 2014 and beyond with or without DWA.