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Outlets to Be Nearly Doubled in 2 Years : Video Firm's Stock Offering to Fund Expansion

June 11, 1985|BILL RITTER | San Diego County Business Editor

Trying to keep pace in the already-crowded but still-expanding videocassette market, San Diego-based Video Library will spend $1.2 million of its $3.6-million first-ever public stock offering for expansion.

Video Library has 20 stores in San Diego and company executives expect to open 15 to 20 additional outlets within 24 months.

The videocassette rental market is becoming saturated by non-traditional sources such as supermarkets and record stores.

But the industry's growth will accommodate the saturation, Video Library executives believe: By 1989, about 50% of San Diego County households will own video recorders, up from 19% in 1984, according to the company's prospectus.

Video Library's 1.2-million-share offering, at $3 per share, will yield about $2.6 million for the company, after commissions and after the sale of 200,000 shares by three company shareholders. Those three own 33.3% of the company each.

Included is Barry Rosenblatt, founder, president and chief executive. After the offering, Rosenblatt will own 20.75% and the other two shareholders--Roy Black and Pauline Sussman--will each own 19.41%, which means that they will still control nearly 60% of Video Library's stock.

Rosenblatt has outside dealings with Black and Sussman, and owns options to buy up to 25% of two companies owned or controlled by Black and Sussman.

The company is not using an underwriter, but instead is "self-underwriting" the offer. Self-underwriting is increasingly popular for companies considered too small for large underwriters to bring to market, according to Gerald F. LaKarnafeaux of First Wall Street Corp. of La Jolla, which is helping Video Library go public.

The offering is on a "best efforts" basis, which means that it will close when the $3.6-million goal is met.

Late last year, Video Library mailed a questionnaire to some of its customers, asking if they would buy stock in the company.

About 8% of the approximately 25,000 customers surveyed said "we should look into (going public)," Rosenblatt said Monday. "That's an extremely good rate."

The company's sales jumped 42% in 1984 to $5.8 million. However, net income dropped 45% to $243,000 and the company had a negative working capital of $1.9 million at year-end 1984.

Rosenblatt said he foresees increased competition in the videocassette market leading to a shakeout. "The moms-and-pops can't afford to buy their fair shares of cassettes," he said. "They can't buy the copy breadth and depth."

But Rosenblatt stopped short of predicting when a shakeout may occur. "I've been reading it (was coming) every year for the last two years," he quipped.

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