UPDATE: Digital Domain CEO Resigns, Company Shutting Port St. Lucie Location

--John Textor resigns as chairman and CEO

--About a third of the company's employees laid off

--Board and interim chief operating officer to make decisions for company

(Adds details on Mr. Textor and the company's executive plans, as well as a share price update, in the second to fourth paragraphs.)

 
   By Ben Fox Rubin 
 

Digital Domain Media Group Inc. (DDMG) said its CEO resigned and it will shut down its Port St. Lucie operations, cutting nearly all its staff at the location, as the embattled company starts a strategic realignment to focus on its core digital special-effects business.

Shares sank 40% to 59 cents Friday after being halted for much of the day. Shares are down 91% so far this year.

John C. Textor stepped down, effective immediately, from all his company positions, including chief executive and chairman. Following Mr. Textor's exit, the company's board and interim chief operating officer will be making decisions on behalf of the company, Digital Domain said, and the company is still weighing its options on appointing a new chairman and CEO.

Mr. Textor had been the target of harsh personal attacks by two anonymous commenters on a message board, with some statements referencing his children and wife, according to the Palm Beach Post. Fearing for his family's safety, he persuaded a local judge this week to order Yahoo Inc. (YHOO) to remove the posts, the publication said. A spokeswoman for the company declined to comment on the situation.

Ed Ulbrich, the company's chief creative officer, was named chief executive of Digital Domain Productions Inc., the company's core special-effects business.

As of March 1, the company employed about 933 full and part-time employees, with 272 employees located at Port St. Lucie, Fla. Only about 20 employees from that location will remain as part of the wind-down, the company said.

Digital Domain has been struggling to stay afloat, as it recently defaulted on six senior notes worth about $35 million, and accrued interest and other amounts worth an additional $16 million. It has received a reprieve from its creditors, who agreed to delay pursuing remedies, including foreclosing on the company's properties.

Last month, the company said it plans to evaluate a broad range of strategic and financial alternatives, including a potential sale of the company. On Friday, the company said it will continue to evaluate restructuring alternatives as it looks to reduce overhead and restructure its long-term debt.

Digital Domain said its studios in California and Vancouver intend to continue operating without interruption, as will the Digital Domain Institute, a for-profit post-secondary school in West Palm Beach, Fla., which is as partnership with the Florida State University.

Digital Domain, which went public in November, has struggled to climb out of the red as operating costs have remained high while revenue has wavered.

Write to Ben Fox Rubin at [e-mail]

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