Is Isaac Larian’s Crowdfunding Campaign to Save Toys R Us One Big Publicity Stunt?

Last Updated on January 3, 2020 by Danielle

#SaveToysRUs

Some critics have called into question billionaire toy mogul’s crowdfunding campaign to salvage Toys R Us.

After raising $200 million in funds with his own money as well as investor funds in his #SaveToysRUs campaign that garnered attention on social media a few weeks ago, Isaac Larian started a GoFundMe campaign to reach their ultimate funding goal of $1 billion. After Toys R Us announced it would be liquidating its entire retail chain of 735 US stores, Larian, a billionaire toy mogul and MGA Entertainment’s CEO, is attempting to salvage at least 200 to 400 U.S. Toys R Us stores. While many applauded his initial initiatives, some critics are calling into question his most recent crowdfunding campaign – calling it nothing more than a publicity stunt.

Larian was recently seen at one of the Toys R Us stores in Woodland Hills promoting his campaign. Pulled along with four children, he was in a Cozy Coupe going around the store chanting “Save Toys R Us”. They were filming a new video to promote Larian’s new ‘Save Toys R Us’ GoFundMe campaign. Some have called this a long-shot effort to keep hundreds of Toys R Us stores open.

The 64-year-old billionaire toy mogul stated: “Toys R Us is like a sick patient on the ICU table, and if you don’t operate fast, it’s going to die.” There’s not much time left, as liquidation sales have already begun last Friday at all U.S. Toys R Us locations with ‘Going Out Of Business’ banners hanging out front. Larian believes he has until May to close out this deal, so he is now turning to the public for help.

Thus far Larian has raised $200 million – of which $100 million is from his own personal funds and $100 million from undisclosed large investors. He has plans to salvage 200 to 400 U.S. Toys R Us stores and merge it with 82 Canadian stores, but he still needs millions more in funding. Furthermore, he would have to obtain approval from the Bankruptcy Court for this special request.

Larry Perkins, a restructuring advisor and CEO for SierraConstellation Partners, brought to light the fact that Toys R Us has been in bankruptcy since September of last year yet was not able to devise a plan to remain in business. Perkins said, “I’m familiar with virtually all the professionals that are working on the case. The investment bankers are some of the best in the world. If this was a viable alternative, I think they would have uncovered this stone.”

Others have mocked the idea that a GoFundMe campaign could realistically save Toys R Us. Generally, people go there to raise just a few thousand dollars. To date, the largest funding has been $21 million from 20,500 donors. In contrast, Larian is attempting to raise $800 million on this platform.

Part of the problem stems from this very fact: Donors who fund at least $100K simply get a #SaveToysRUs bumper sticker, a pin, magnet, “I’ll ALWAYS Be A Toys ‘R’ Us Kid” T-shirt, and an invite to a local Toys R Us reopening block party instead of a stake in the company.

According to Andreea Gorbatai, an assistant professor at Berkeley’s Haas School of Business, “If any of his investor friends would want to contribute, they would not contribute on the GoFundMe page. They would pitch in for equity, so attention seems like the only thing he’s looking to get out of this.” Larian did not deny that the GoGundMe campaign was a publicity stunt but told the LA Times, “And what’s wrong with that?”

According to Larian, other large private investors also believe Toys R Us is worth saving. Larian said, “They have not come and said, ‘I’m going to give you $100 million or $50 million,’ but these are very, very high net worth individuals who for them to write a check for $300 million or $400 million is not a problem.”

Started on March 21st, this campaign has even resonated with loyal Toys R Us fans. As of today, $53,000 has been donated by 1,740 donors. Donations thus far have ranged from $5 to $1000. However, that is still a very long distance away from the ultimate goal of $800 million.

According to Isaac Wolman, owner of Make It Real who donated $100 to the campaign, “People talk about Amazon picking up a large percentage of the missing business, if Toys R Us closes, but the reality is Amazon is not a place where you go and search and you experience a multitude of different toys. Part of the wonder of Toys R Us was going in with an empty shopping cart, walking up and down the aisles and finding something you love, and it could be from a brand you’d never heard of before.”

For Larian the stakes are quite high since Toys R Us generated roughly 18 to 20 percent of MGA Entertainment’s sales.

Toys R Us was founded in 1957 by pioneer Charles Lazarus, who passed away just last week at the age of 94. A huge part of Toys R Us’s success was due to its vast inventory, many of which could not be found at competitors. Many point to Toys R Us’s downfall in 2005 with the leveraged buyout. Under this new ownership, it amassed $5.3 billion worth of debt, which made it challenging to maintain and upgrade its retail stores in the wake of fierce online competition.

When it filed for bankruptcy, CEO David Brandon revealed plans for creating interactive spaces with party rooms, live product demos, and even dedicated areas for kids to play with new toys without actually purchasing them. However, the company acknowledged that it did not have the necessary funding to support these initiatives.

When inquiring about how he would operate Toys R Us stores, Larian didn’t give any specifics but suggested something similar. Larian stated: “It’s not just about selling toys – it’s an experience, and unfortunately, during the past several years when this company was controlled by private equity companies, not much has been spent to make these stores interactive. You don’t have to pay $110 to go to Disneyland. You come to Toys R Us near you.”

Despite all the critics, Larian has his fair share of supporters, like Richard Gottlieb, CEO of Global Toy Experts. Gottlieb mentioned that with Toys R Us’s ownership, it “fell out of love with toys” and transitioned from “the world’s greatest toy store to the world’s greatest toy department.”

Gottlieb added Larian “is not saying he’s trying to save what was – he’s wanting to save what could be, and I think it’s very optimistic. He’s Isaac Larian. He’s a contrarian. He’s not going to do what you expect him to do, and yes, it’s a long shot, but look at how much attention he’s getting.”

Source: LA Times

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