SeaWorld, ex-CEO Atchison settle with SEC over non-disclosure of `Blackfish’ impact

SeaWorld Entertainment Inc and former CEO James Atchison agreed to pay more than $5 million to settle SEC charges for allegedly misleading investors about the impact of the documentary film Blackfish.

The San Diego theme park is paying a $4 million penalty, while Atchison is paying $1 million in penalty and disgorgement, the SEC said.

SeaWorld and Atchison neither admitted nor denied the charges.

The SEC alleged that from December 2013 through August 2014, SeaWorld and Atchison engaged in fraud by failing to disclose the Blackfish effect on investors, according to a lawsuit filed Sept. 18 in U.S. District Court for the Southern District of New York.

The company and Atchison made “untrue and misleading” statements or omissions in SEC filings, earnings releases and calls to the press regarding Blackfish’s impact, the regulator said.

“This case underscores the need for a company to provide investors with timely and accurate information that has an adverse impact on its business,” said Steven Peikin, co-director of the SEC enforcement division, in a statement.

“SeaWorld described its reputation as one of its ‘most important assets,’ but it failed to evaluate and disclose the adverse impact Blackfish had on its business in a timely manner.”

SeaWorld was also a Blackstone portfolio company during this time. Blackstone acquired SeaWorld for $2.3 billion from Anheuser-Busch InBev NV in December 2009. The buyout shop invested about $1 billion, Bloomberg reported.

SeaWorld paid out about $610 million in dividends to Blackstone before it went public in April 2013, the story said. (Blackstone trotted out SeaWorld penguins at the NYSE to celebrate the IPO.)

Blackstone sold the company in 2017 to China’s Zhonghong Zhuoye Group Co for about $449 million, or $23 a share. Blackstone made about 2.7x its SeaWorld investment, Bloomberg said.

The film

Released in 2013, Blackfish criticized the treatment of orcas at SeaWorld, claiming it led to stress and aggression. (Tilikum, the killer whale whose story is the centerpiece of Blackfish, was involved in three human deaths. Tilikum died at SeaWorld in January 2017.)

The film sparked outcry over SeaWorld’s treatment of orcas and resulted in SeaWorld losing $1.7 billion in market cap the year the film was released, Quartz reported.

SeaWorld, however, didn’t acknowledge the impact of the film until Aug. 13, 2014, when it said in a regulatory filing that declining attendance was caused in part by the negative publicity connected to Blackfish, the SEC complaint said.

This caused SeaWorld’s stock price to plunge about 33 percent, resulting in about $830 million in losses to shareholders, the SEC said.

The evasion allowed Atchison to sell SeaWorld shares from January to March 2014 at a price that was inflated and helped the then-CEO avoid about $730,860 in losses, the lawsuit said.

The SEC charged the theme park and Atchison with violating antifraud provisions of the federal securities laws. SeaWorld was also charged with reporting violations.

“The company is pleased to have resolved this matter and to continue to focus on delivering superior guest experiences, world-class animal care and rescuing animals in need,” SeaWorld said in a statement.

‘“The company cooperated with the Commission throughout the process and the Commission approved the settlement on Sept. 18, 2018.”

Frederik Jacobs, a former SeaWorld spokesman, also agreed to settle a fraud charge. He is paying $100,000 in disgorgement and prejudgment interest. Because of Jacobs’s assistance to the SEC in the investigation, he was not assessed a penalty, the regulator said.

Blackstone and Atchison could not immediately be reached for comment.

Action Item: For more information, check out SeaWorld’s website here.