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I’m doing the Week in Diamond on Thursday instead of Friday because I’m going to the ALA on Friday and might not have the energy for it tomorrow because…….it is a lot.
I will definitely hear more on NEXT WEEK’S Week in Diamond at ALA, because several publishers will be there.
Following Wednesday’s bombshell – that Diamond plans to sell off its inventory to pay off debts – I spoke to a few publishers and they all said “I’m talking to my lawyer.” Unfortunately, this kind of sale is pretty typical in a bankruptcy. But it seems to me, having followed all this for so many years, that the image of Diamond as a necessary, beneficial part of the industry held on so long that people just didn’t see this coming. I’ve said this before but the Diamond that you may have known and done business with ended on January 14th. It might have ended a long long time before that but on January 14th it ended legally.
I’ll continue to use “Old Diamond” to refer to the business that ran until May 14th when the sale closed. It is this business that is liquidating stock to pay off the debts from bankruptcy and secured creditors, including Chase Bank.
“New Diamond” is the company owned by Sparkle Pop/Ad Populum that has been ghosting publishers and comics shops alike. This company has been in existence since May 16th.
What is going on at New Diamond?
There is a lot to unpack but let’s start with New Diamond. Publishers have been jumping ship and ceasing shipping to New Diamond to the point where last week’s FOC contained only 7 items, most of them toys. Titan Books and Dynamite have also ceased shipping to Diamond. Following today’s announcement I doubt anyone will keep sending them books. Eric Reynolds of Fantagraphics put this all out in a statement he posted on a retailer forum last week, announcing that they too woudl not be shipping to Diamond any more:
A NOTE TO RETAILERS ORDERING FANTAGRAPHICS BOOKS THRU DIAMOND
Effective immediately, Fantagraphics will no longer be distributed through Diamond Comics Distributors. When Diamond declared bankruptcy in January, Fantagraphics and Diamond worked together in good faith to maintain market stability and avoid any further disruption than was necessary.
While all invoices prior to the bankruptcy filing were immediately frozen (and remain unpaid) under Chapter 11 proceedings, Diamond continued to act responsibly and reassured us that business would continue as usual and invoices would be paid on time. Which they were, up until May 16, the day that AdPopulum took over. Since then, the company has gone silent, with no payments for any books sold under the new ownership. Repeated attempts to communicate with Diamond and discuss a payment schedule have been ignored.
At the end of May, we suspended shipping new releases to Diamond until they caught up on their payments. This has not happened. Last week, in response to a routine request to transfer stock, AdPopulum replied:
Please be advised this order will not be fulfilled as our legal team has instructed us to halt all product transfers & NCR requestsl [sic] at this time. We apologize for the inconvenience.
Thanks,
The NCR Team
(We routinely need to restock our Seattle warehouse that fulfills our ecommerce business.)
Diamond does not own any Fantagraphics inventory — that inventory is warehoused by Diamond on consignment and its disposition is at our discretion, not Diamond/AdPopulum’s. Although we have not received a ransom note, AdPopulum is now effectively holding hostage inventory that they do not own, while apparently continuing to sell that inventory and not paying us for those sales. (We have received weekly sales reports for books they do not pay us for!) Please do not order Fantagraphics books and comics through Diamond, even for in-stock inventory, because there is no indication that AdPopulum intends to pay Fantagraphics — and thereby its authors — for those sales.
We encourage all retailers who previously ordered books through Diamond to shift their orders to one of our other distribution partners, including Lunar, W.W. Norton, and Ingram books in the U.S., and Turnaround in the UK. Anyone with any questions about how to best obtain our books is encouraged to email Colin Blanchette at [email protected].
Fabrice Sapolsky at FairSquare Graphics also posted on FB (prior to the consignment sale notice it should be pointed out):
DIAMOND SITUATION UPDATE.
Everytime I read a new report on the Diamond situation, I feel a burst of anger and stress at the same time. Yesterday, Richard Johnston published a post on Bleeding Cool stating that Fantagraphics was considering “that Diamond Comic Distributors is holding their comic books hostage and is demanding payment”. Isn’t that what a bunch of small presses, including myself have been saying for weeks? It sure is.
ThIs morning, I received another one of those statements Diamond sends or used to send every week. This is page four. The recap page. You don’t really need to see the rest. I highlighted the interesting sections.
You can see that the week between 6/16 and 6/22, we sold 30 copies of our books. It’s not a lot, but it doesn’t really matter because you have to consider that money from these sales will not be given back to us (which is fraud, we still have a contract) as it has been the case for the past 7 weeks.
Now, what’s even crazier, is that Diamond keeps accepting returns for our books (which obviously is also a problem) while not paying us and, as Fantagraphics said, “holding our inventory hostage.”
On June 18, I formally asked Diamond to STOP selling our books. The warewhouse did not get the memo (apparently). Another issue (=fraud).
As you see on the statement, our books are on “consigment” basis, which means they are at the Diamond facility but remain our full and sole property.
Our future is in jeopardy because some people we don’t know are still figuring things out about who owns what at Diamond. This is insane and another case for fraud.
As we’re about to leave to attend ALA, the American Library Association Book festival, a place where most librarians and retailers come to discover what publishers have been up to, I have every intention to talk about what we’re experiencing to anyone who’ll visit our table (booth #2450 in Artist Alley). People need to know.
As I wrote in a previous post, it’s a case of attack on Freedom of publishing we’re facing.
It’s obvious ground for multiple lawsuits. And we’ll get there.
But above everything, I’m writing and showing this because our peers and readers need to know the truth. They need transparency.
And if you like what FairSquare Graphics and many other publishers tied in this web of deceit are publishing, please buy directly from us.
Please support our crowdfunding campaigns.
Please help us outlive this cruel joke while we’re looking for a new distribution partner for the bookstores and library channels.
Every sign of support counts. Thanks @followers and everyone else.
Following the sale announcement he posted:
At this point, I’m going to call “old Diamond”, thieves and bandits. We have NOT authorized this. And if this happens, I am disgusted.
How can we trust another big company with our most valued property, our books. The fact that none of the vendors had any official note but have to rely on journalists proves the level of contempt Diamond’s operators have for their clients (us).
SO that’s publishers OUT. I’ve seen and heard numerous reports from retailers that they are no longer ordering from Diamond. Brian Hibbs posted:
Hm, I had a reason to go look at Diamond’s TOS today, and: “Minimum Order: To order from Diamond, you must maintain a minimum monthly order of $425. Net Cost items may be included in your total to meet this minimum.”.
My Jun25 Diamond order (for stuff where Diamond is the SOLE source) was under $350. I have never, previously, ever missed the minimum by less than 6x. This is going to be very non-viable, very fast.
Based on what I’ve heard, this is a LARGE order compared to what most retailers are ordering from Diamond in these last days.
Obviously losing all the consigned inventory they THOUGHT they owned might be devastating to many publishers, especially when it looks like they won’t be getting any of the money owed them due to all the other debts. So this could be a huge burden for many publishers. We’ll know more after they talk to their lawyers.
Why is New Diamond Doing this?
MEANWHILE, what about New Diamond? Well, with no inventory and no publishers (and I assume toy companies, who must be in similar boats) sending them product, and New Diamond showing no interest in doing business with publishers, stores or their employees given their silence on the matter, that’s that. Given all of the above…how is there any business to run?
How is all this happening? For the answers to that, let’s turn to some excellent reporting by Graphic Policy once more (with some research assistance from me.) Ad Populum’s Diamond Non-Payment to Publishers has Echoes of Joel Weinshanker’s Hastings
As I’ve noted several times before, this is NOT Ad Populum’s first bankruptcy acquisition rodeo. They have a history of buying distressed assets or companies that have gone bankrupt, always with a new LLC created just for that purpose. Most significantly for our purposes, in 2014 they bought the struggling book store chain Hastings for $21.4 million under the LLC Draw Another Circle. Hastings would file for bankruptcy in 2016, as Wikipedia tells us:
In June 2016, Hastings Entertainment filed for bankruptcy protection.Under Draw Another Circle’s management, the company had suffered heavy losses, accumulating $140 million in debt.
I looked at the bankruptcy case for Hastings, and the filings run to more than a thousand documents over years – a grim prognosis for covering this Diamond stuff. But a separate lawsuit was filed in 2017 against Draw Another Circle and its owner, Joel Weinshanker, by Curtis R. Smith, the Liquidating Trustee of the Hastings Creditors’ Liquidating Trust, in other words, the person appointed to oversee the bankruptcy liquidation. This suit is quite startling. You can read the whole thing in a court decision regarding various claims in the case, some of which were upheld and some dismissed. The basic claims are that Weinshanker used Hastings money to acquire several businesses that had nothing to do with Hastings, taking money away from shareholders and creditors. The allegations from the complaint (a separate document that I’ve read):
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By this Complaint, the Trustee seeks to redress the significant damage visited upon the Debtors’ estates and creditors by the acts and omissions of Weinshanker – the direct or indirect owner, chief executive, and director of each of the Debtors – as well as his fellow Defendants, each of whom were directors and/or officers of Debtor Hastings Entertainment, Inc
(“Hastings”) during Weinshanker’s stewardship.
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As detailed below, Weinshanker, after engineering a leveraged buyout of Hastings in July 2014, carried out a strategy of using Hastings as his personal piggybank by causing it to pour millions of dollars into investments that not only conferred no benefit on Hastings, but hastened its demise. Weinshanker relied upon the fact that as of the Buyout Date (defined below), Hastings had substantial availability on its revolving line of credit with Bank of America, N.A. (“BofA”) that could be drawn upon to fund his vanity projects. Moreover, he burdened Hastings – and its borrowing base – from and after the Buyout Date by largely funding his acquisition through Hastings’ issuance of a $15 million second-lien term loan, over the objections of Hastings’ management.
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Weinshanker used Draw Another Circle, LLC (“DAC”) as a holding company for Hastings. He then used other special-purpose acquisition vehicles to purchase additional businesses using Hastings’ money, including MovieStop, LLC (“MovieStop”) and Sports Images, Inc. (“SPI”). These businesses were then brought under the DAC umbrella. As a result, all of the potential upside from these acquisitions would flow upward to Weinshanker, yet all of the risk was borne by Hastings and its stakeholders. This complete shifting of risk left Weinshanker free to loot Hastings – and by extension, its creditors – for his exclusive benefit.
There is a lot, lot more, but you get the gist. The case dragged on for a few years before ending in a settlement where Weinshanker paid Smith $2 million.
That brings us to 2025, and the Sparkle Pop vs Alliance lawsuit over Alliance hiring several Diamond employees. Once again I commend Brett Schenker for digging into this case: KEY DOCUMENTS IN AD POPULUM’S PURCHASE OF DIAMOND AND LAWSUIT AGAINST ALLIANCE REVEALED WITH JUICY DETAILS.
It seems that there has been a “Streisand Effect” with this lawsuit. While the case against Alliance poaching Diamond employees hinges on alleged damages from their revealing Diamond secrets that would adversely affect New Diamond’s business, it seems all of that information is being revealed in court filings! Lawyers sought to seal the Diamond Employee Handbook and exit interviews from the Diamond Seven (as we’re calling them) but the court ruled there was no reason to do so and now we can all read about how Diamond wouldn’t allow its employees to wear leather unless it was shoes, belts or jackets (under business casual attire requirements.)
The exit interviews are a sad recitation of demoralized employees – growing gloom of working at a company that is clearly circling the drain while getting all your information from comic book news websites, such as this one. While I was doing my research for this, I found this Substack by Daniel Best which has a nice clear, account of the interviews. Joe Lunday’s is the most vivid:
Joe added he was concerned about Diamond’s future now that the sale to Ad Populum has taken place. Joe said he had a conversation with Chuck Parker, President, and was encouraged to stay but he had concerns about the future with vendors and the company, overall.
Joe also said morale is very low across the organization. Ad Populum has provided no communication, leading others to wonder how much they really care about employees. Further, they eliminated the necessary roles to keep any attempt at success very limited.
Additionally, Joe said when Joel Weinshanker from Ad Populum was in town and meeting with various employees, Joe’s meeting with him, which he thought was scheduled for 15 minutes, lasted 4 minutes. Joe’s impression was that it was 2 minutes longer than Joel would have liked. Joel came off as very off putting. Joe went into the meeting with questions for Joel. Joe walked away with the strong impression that Joel really only wanted the warehouse and was meeting with employees as a formality.
Also, when Joe walked into the meeting, Joel fist bumped him and then proceeded to read his name and title off of a piece of paper. Joel then asked what Joe did. Joe explained his role in sales and read sales data information from last year. He further described the business…Japanese, Taiwan, Amazon, Godzilla. Joel asked who his contact was at Amazon. Joel gave very little feedback during the brief encounter.
Joe shared that he later spoke with Steve Warble, Sales and Marketing Inventory Manager. Steve told Joe that his meeting lasted 3 minutes. He, too, had the same impression of Joel.
Additionally, Joe said he was speaking with someone else (he did not share who) and that individual said that Joel told them directly “you know I did not get a good first impression of you”. Joel later changed his tune when he admitted to needing the person.
Joe also said that he was told that Mike Schimmel and Tim Lenaghan were forced by Joel to make snap staff decisions…keep vs who to let go. This was hard for them to do given that many of the staff are in various departments.
Therefore, Mike and Tim did not have strong knowledge of good vs bad. They felt like that had to make random decisions vs well thought out.
Joe said, long term, he always struggled with pay. He felt Diamond lost a lot of good people due to the low pay they provided. Further the pay did not always match the talent.
In case you didn’t read all that, a key comment: “Joe walked away with the strong impression that Joel really only wanted the warehouse and was meeting with employees as a formality.”
If you really want to depress yourself, you can read all the key filings here.
And that brings us to today. As news circulated of Diamond’s plan to liquidate their stock, there were many shocked comments on BlueSky, including this from Matthew Rosenberg:
As someone else put it (I can’t find the post now but trust me): “Fuck Diamond.”
As I think we’ve all figured out by now: there is no Diamond any more.
Who’s left and the biggest question
And that leaves us with two players in the game:
Diamond UK! I was reminded of this by a post by Rebellion’s Ben Smith:
“In all this mess, I want to say Diamond UK has behaved remarkably well, paying its customers and trying to manage a seemingly impossible challenge. As the only non-bankrupt going concern to emerge from old Diamond they should get some plaudits to keeping their boat afloat.”
That is good to hear, but also….no one knows who owns Diamond UK any more.This anonymous benefactor is doing the Lord’s work.
And finally there is Universal Distribution. They are looking to get into the US, starting with DC Comics, perhaps as soon as September on sale products. All of the above mishegoss has me wondering though – Universal has a strong reputation among stores and publishers – their shipping is said to be outstanding. But will their association with all the above craziness cause their rep to take a hit? I understand that people may not be able to say things publicly because of legalities, but can’t SOMEONE say SOMETHING?
One person who is saying things is Phillip Russertt of the start-up Philbo Distribution. If you’re FB pals with him, he says a lot every day! Today he posted:
In an effort to assist crowdfunding campaigns Philbo Distribution is offering a marketing opportunity for small publishers who need a boost, or if you’re a convention looking to advertise direct to your audience. For a small and reasonable fee we can include an AD in the Philbo Publishing books and or include a flyer with every order sent out. You provide the flyer and we make sure it goes to every retail outlet as well as in our digital monthly newsletter to fans. The first wave of orders is for September and then every month after that. If you think this can help you and you’re on a tight budget we can help. Email me at: [email protected]
Russertt has a LOT going on, and I hope he can pull it off.
There is one question that keeps haunting me in al this, and I ask it frequently and would love to hear your own opinions in the comments: Why did Diamond/Raymond James/Robert Gorin do everything they could to deflect the Alliance bid in favor of the Universal/Ad Populum bid, even though Alliance’s bid was higher and they were buying ALL of Diamond, and the UAP bid split everything up? I asked this question on a podcast of retailer observers and answers varied: no one ever really wanted the comics, just the toys and games (probably true); or maybe because there was some old boy connection we don’t know about. It’s still a mystery.
I keep thinking about the statement that Diamond put out on April 28th:
Diamond Comic Distributors (“Diamond” or “the Company”), today announced that it will no longer be moving forward in the transaction process with Alliance Entertainment.
“Diamond Comic Distributors has pivoted to alternative, exceptionally well-known purchasers who are excited to partner with us. These companies have strong balance sheets and, importantly, unmatched presence and experience in our core industries,” said Diamond Chief Restructuring Officer Robert Gorin. “We are finalizing purchase agreements with these third parties and expect to announce the identities of these purchasers and seek court approval very shortly to complete the sale transactions.”
“strong balance sheets and, importantly, unmatched presence and experience in our core industries.”
That seems to have been a mirage.
And on that note, this has been……the week in Diamond.
English (US)