Harvey Entertainment falters after comic book characters fail to score.

Harvey Entertainment Co. was looking like Richie Rich last spring, but speculative trading has caused the company's stock value to fade away faster than Casper the Friendly Ghost.

Santa Monica-based Harvey provides a lesson in the volatile and seemingly irrational behavior of entertainment stocks, which may be even more susceptible than stocks in other industries to wild fluctuations in value caused by rumor and speculation.

In Harvey's case, there's a company seemingly sitting on a gold mine - the rights to a group of cartoon characters from the 1960s era including Richie Rich, Casper and Baby Huey who underwent a major revival last year through new motion picture and television productions, as well as a library of classic comic books and 261 six- to eight-minute animated shorts. Harvey's earnings were $817,000, or 21 cents a share, from January through September 1995, compared to a loss of $142,000 or 4 cents a share in the similar three-quarter period in 1994.

Expectations exceeded reality

In short, Harvey is a company enjoying slow growth. But its stock value has plummeted, going from a high of $18.25 last March to a closing of $6.37 on Jan. 17. The reason, as stock analysts and company officials agree, is that investors expected a feature film released last summer, starring Harvey's most popular character, to draw in more money than it was able to deliver.

"Casper," distributed by Universal Pictures and produced by Steven Spielberg's Amblin Entertainment, was a big success at the box office, generating more than $100 million in the U.S. and an additional $170 million overseas.

But Harvey did not share in the profits. The company was paid an up-front licensing fee - which Harvey Chief Financial Officer Gregory Yulish described as "minimum wage" - for the right to the film's characters. Other revenues were generated from Casper merchandise and promotional tie-ins.

"The stores this summer carried a lot more Pocahontas and Batman toys than Casper toys," Yulish said. "People bought (Harvey stock) on the expectation (of high revenues) and sold on the reality."

Harvey moved last week to a smaller set of offices in the same building on Wilshire Boulevard following the layoffs of seven employees let go after the company closed its comic book division. The rights to publish comic books using Harvey characters have been sold to New York-based Marvel Entertainment Group.

Most stock analysts have placed a "hold" recommendation on Harvey shares. William Gibson, an analyst in the Santa Barbara office of investment banker Cruttenden Roth, said he thinks Harvey will continue to grow and expects it to generate earnings of up to 50 cents a share in 1996.

"There are a lot of good opportunities relative to those characters," Gibson said.

Harvey characters will get continued exposure this year. An animated TV series based on Casper will premier in February on the Fox Network, and two other animated series, based on Baby Huey and Richie Rich, are either in syndication or soon will be.

Harvey Entertainment Co.
(HRVY/Nasdaq)

Qtr. Sept. 30:                   1995          1994

Revenues                         $6.4          $3.9
Net income                       $0.8         ($0.1)
Average shares
 outstanding                      4.0           3.3
EPS                             $0.21        ($0.04)

Closing price Jan. 17
$6.37
Down $0.25
52-week

High                              Low

$18.25                           $6.25

All figures except EPS and share prices in millions