Chill hits CoolBrands as stock suffers meltdown

Investors dumped CoolBrands stock in a frenzy of late trading Wednesday that lopped $350 million off its market value in 38 minutes. Stock-market regulators later cancelled the trades, saying it was unfair to small investors, who hadn't yet seen the announcement.

The Toronto Star
July 30, 2004

Chill hits CoolBrands as stock suffers meltdown
Weight Watchers kills lucrative pact. Deal iced over Smart Ones name.
Dana Flavelle

What's in a name?

When it comes to brand image and food, just about everything, as Eskimo Pie maker CoolBrands Inc. learned the hard way.

Shares in the Toronto-based maker of frozen novelty desserts fell 29 per cent yesterday, ending the day down $4.90 at $12 a share, despite the company's efforts to minimize the damage from the surprise loss of its lucrative Weight Watchers' deal a day earlier.

The deal broke down over the use of the Smart Ones brand name, CoolBrands president and co-chief executive officer David Stein revealed in a hastily convened conference call with analysts early yesterday.

Weight Watchers wanted CoolBrands to stop using the Smart Ones brand name, which legally belongs to its former corporate owners, H.J. Heinz Co. Inc. "All the royalty payments were going to Heinz. Weight Watchers wants to build its own brand name without the Smart Ones name," Stein explained.

CoolBrands argued the Smart Ones brand is more popular than Weight Watchers' name.

The deal went instead to Wells' Dairy Inc., the United States' largest family-owned dairy, which agreed to forgo the Smart Ones name, a move Stein insisted yesterday came as a complete surprise. Just last week, Stein was assuring analysts that CoolBrands' licensing deals were in no difficulty. CoolBrands also said yesterday it plans to buy back up to 1 per cent of its shares, which will help prop up the price.

Meanwhile, Toronto Stock Exchange officials said they are investigating the company's failure to notify them in advance of the shocking late-day announcement on Wednesday.

Stein apologized for the "mistake" and said it was made as the company rushed to put out a statement ahead of Weight Watchers' announcement.

But it didn't help. Investors dumped CoolBrands stock in a frenzy of late trading Wednesday that lopped $350 million off its market value in 38 minutes.

Stock-market regulators later cancelled the trades, saying it was unfair to small investors, who hadn't yet seen the announcement.


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