Sparkle Pop Blames Diamond for Sparkle Pop Selling Consigned Goods, Objecting to Diamond’s Motion
In August, the Ad Hoc Committee of Consignors, a group that represents a bunch of publishers, filed a motion in (old) Diamond‘s chapter 11 process attempting to get clarity as to who is selling consigned goods. The consigned goods are inventory that is currently at the center of a legal fight between (old) Diamond and comic and game publishers as to who “owns” them and if (old) Diamond has a right to sell the goods.
In a response to the Ad Hoc Committee’s motion (old) Diamond revealed that Ad Populum/Sparkle Pop had been selling consigned goods when they never purchased them and that (old) Diamond had told them to not do that with threats from their lawyer. Sparkle Pop was one of the winning bidders that purchased assets from (old) Diamond for their own (new) Diamond. That purchase of assets didn’t include consigned goods.
Most recently, Diamond filed a motion against Sparkle Pop wanting the court to force Sparkle Pop to stop selling those consigned goods as well as “compensatory damages and punitive damages.” It is believed to be around $1.38 million worth of inventory has been sold.
Today, Sparkle Pop responded back to Diamond’s motion objecting to it and basically pointing a finger at Diamond’s incompetency.
In Sparkle Pop’s filing, they describe themselves as being “thrusted” “in the middle of their dispute with the consignors to use as a scapegoat and to obtain interim monetary relief.”
Sparkle Pop objects to any expedited treatment of the dispute between it and Diamond because:
- That it is no longer selling any Consigned Inventory; and
- That the proceeds of any Consigned Inventory sold since May 15, 2025 have been segregated and are being held pending clear instruction or Court order regarding who is entitled to the proceeds of those sales.
In short, Sparkle Pop is admitting they sold the goods and just waiting to hear what they should do with the money gained from it. Should it go to Diamond, or as the Ad Hoc Committee has recently motioned, go to the publishers?
In our original article where Diamond pointed the finger at Sparkle Pop for selling the consigned goods, we asked how this could have happened? All it’d take was Diamond zeroing out the consigned goods in the database it handed over to Sparkle Pop to prevent this. It couldn’t be that simple, can it?
The answer is, Diamond really is that incompetent.
From Sparkle Pop’s filing, Diamond made no effort to remove the consigned goods from their website when they handed it over to Sparkle Pop.
According to Sparkle Pop, Diamond also “did not segregate, remove, transport or otherwise dispose of the Consigned Inventory from the Olive Branch, Mississippi warehouse facility that Debtors sold to Sparkle Pop.”
All of that made it difficult for Sparkle Pop to distinguish between the consigned inventory and non-consigned inventory among the commingled goods. This would also hint that Sparkle Pop didn’t inspect the inventory it purchased to make sure what was purchased was present. If they did, they would have come across inventory not on their purchase list… even if they were given a list of the purchased inventory (or could have been given a list of inventory that included the consigned goods).
Sparkle Pop in their filing say they just filed orders that came through the website that Diamond handed over to them as part of regular business. It didn’t go out of its way to sell the consigned goods.
Sparkle Pop further argues that if they didn’t sell the inventory, the consigners (aka publishers) might come after Sparkle Pop “for failing to secure value-maximizing sales in the ordinary course of business, and in continuation of the business expectations the consignors had developed during the course of their relationships with” Diamond. The goods, Sparkle Pop argues, lose value over time. So, it was in the publisher’s best interest they sell them.
Sparkle Pop then claims when it recognizes it was selling consigned goods, they put any proceeds from the sales into a separate bucket so they could eventually be given to the “rightful party.”
Further clarifying the timeline of all of this:
- May 27, 2025 – Sparkle Pop informed vendors, including consignors, that Sparkle Pop had taken over ownership of Diamond’s assets and operating the business.
- For a month after Sparkle Pop fulfilled orders including consigned goods placed through its website with no objection from Diamond.
- June 8, 2025 – Diamond contacts Sparkle Pop telling them they needed Diamond’s consent to “process sales of Consigned Inventory” and Sparkle Pop should “cease honoring all sales of Consigned Inventory.”
- Sparkle Pop was still receiving shipments of Consigned Inventory to the distribution warehouse for sale.
- They continued to sell consigned goods with Diamond’s knowledge since they told vendors they were in charge of sales now and vendors kept sending Consigned Inventory.
- August 2 – The Ad Hoc Committee of Consignors files their motion to find out who is selling the consigned goods.
As far as how much was sold. Sparkle Pop claims they generated:
$1,051,575 and $515,866 in revenue for Consigned Inventory received prior to Closing and after the Closing, respectively.
Sparkle Pop incurred approximately $251,897 and $181,373 in costs, including shipping, packaging, and other costs associated with honoring sales of Consigned Inventory received prior to Closing and after the Closing, respectively.
Sparkle Pop also states they expected Diamond would reimburse Sparkle Pop for the costs associated with processing the Consigned Inventory which is required under one of their agreements, the TSA, which states Sparkle Pop can process Consigned Inventory.
Read all of Sparkle Pop’s objection below as well as a declaration by Steven Bieg, the Chief Financial Officer of Ad Populum.
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hmm.. curious. Is it possible that Sparklepop isn’t the bad guy here? Probably not, as they haven’t been paying publishers for even the new stock they sold, or even communicating with them.
One thing I’m wondering about. Say if (old) Diamond wins and they now own the consignment goods, could Sparklepop then say as they bought Diamond and all it’s assets, the consignment goods is one of those assets and therefor they own it?
I suppose it depends on the terms if sale regarding the consignment goods, if there was any language around it at all. If there was, it could give us an idea if taking and selling those books was (old) Diamonds intention all along.
This feels like laziness on everyone’s part to me as opposed to an attempt to pull a fast one. They’re both idiots in this case.
Sparkle Pop couldn’t turn around and take the consigned goods if Diamond wins. It’s clearly stated in the sales agreement consigned goods were not purchased by Sparkle Pop. That’s one thing that’s absolute clear. I found that part in the TSA agreement.
There’s some thoughts Diamond knew what it was doing and took on goods on consignment after it knew it was going chapter 11 to then turn around and sell them and not pay the publishers, but that hasn’t been proven.
What’s weird is that some publishers were still sending consigned goods with all of this going on.
My questions are:
Why didn’t Diamond update the database/move to protect the consigned goods that weren’t sold?
Did Sparkle Pop do an inventory check after it purchased to make sure what it purchased was there?
If Sparkle did do an inventory check, what list of inventory did it use?
Thanks for the info about the consignment goods and terms of sale.
Yup, very good questions.
One publisher told me that Diamond had made a big order of their product just prior to announcing they were going Chapter 11. I wonder if it did the same to others. If so it appears this was their plan all along and they made those big orders in order to get more goods they could eventually take, sell, and pocket the money.
A thing that gets missed a lot, and something I’ve brought up a few times, is that the bidders signed an NDA in October 2024 and were looking at the company at the end of 2024. So, Diamond then knew it was in deep shit well before October 2024 since they needed to hire the people to handle things and they didn’t declare chapter 11 until January 2025. I think that’s the damning thing that’s being overlooked.
Here’s the bit about consigned goods in the purchase agreement as to what inventory means:
“Inventory” means all inventory, inventory in transit paid for by Seller, finished goods, raw materials, work in progress, packaging, supplies, parts, and other inventories of the Acquired Business, but excluding any Prepaid Inventory. For purposes of clarification, goods held on consignment by or on behalf of Seller as part of the Acquired Business shall not be considered Inventory for purposes of the Agreement.
I agree, I don’t know what Diamond was thinking. I suspect the plan was to just sell the company to Universal and walk away, but then other players got involved and the lawyers who took over Diamond after Chapter 11 started making other plans.
It’s very odd. All of the bidders we know of were approached in October, Universal, Ad Populum, and Alliance.
My gut says that they didn’t get an outright buyer for the price they wanted so it went to chapter 11. Alliance was the high bidder and was being legit in their bid, they even raised it. Diamond knew about the WOTC stuff and Alliance would decrease their bid by a large sum 25-33% since that’s how much Alliance Games relied on WOTC. So they attempted to turned to this Universal/Ad Populum bid instead. Alliance won as per the rules then when they found out about WOTC, tried to negotiate a lower price and Diamond just didn’t respond since they had this backup bid.
Yes, I suspect Universal didn’t want all of Diamond as without the major publishers on board they wasn’t enough money to be made, especially using the large warehouse in Olive Branch, but they still wanted to sell to Universal as they were another comics distributor and knows how the industry works. While Diamond might have been dumb about certain things, they did care about the industry.
I think Diamonds didn’t bother negotiate a lower price with Alliance because they wanted to sell to Universal from the get go.
Yeah, I think their top choice would have been to just sell it all to Universal. Now, a question there is what Universal’s contracts are for distribution? Their DC contract is global so they can sell in the US. All they would have gotten was Diamond’s accounts and the warehouse and who knows if that was worth whatever millions.
Yeah, my understanding (this all comes 3rd hand at minimum) is that those contracts Universal had were not global which is one of the reasons they’ve been slow to set up US distribution. They are having to work with all the various publishers and their lawyers to either negotiate new contracts or re-negotiate old contracts, which takes time. At the same time they have a bunch of publishers trying to get a hold of them to work out getting distributed by them. Have to remember, they were a subdistributor of Diamond so I’m not sure how much direct connection they had with publishers, contract wise.
Some publishers are Lunar exclusive so they won’t be able to distribute them to the US, at least not until those contracts run out and if the publishers decide to go non-exclusive and use Universal as well.
We know DC was global but don’t know the rest. DC’s “exclusive” with Lunar but Universal still has a global distribution deal. So how “exclusive” folks are is a big question no one has an answer to right now other than Universal and publishers.
It was 2021 when DC went exclusive with Lunar but in 2022 they signed a global deal with Universal, so were they really “exclusive” or DC just wasn’t taking on any for a bit or was the exclusive for roughly a year? That’s things I don’t think we have answers to.
DC did tell Diamond when they left that Time Warner no longer wanted to be in exclusive business relationships throughout the corporate chain. That’s why they had both Lunar and UCS as distributors when they left Diamond. DC was only “exclusive” with Lunar because Midtown/USC decided to get out of doing distribution after a year. I don’t recall it ever being announced that DC was exclusive with Lunar.
Universal, being in Quebec, sold comics to french speaking store owners. Diamond didn’t want to hire and retain french speaking support staff for those stores so it was easier to let them sub distribute and service those stores. One of the early issues of DC going Lunar/UCS was they also didn’t have french speaking staff for those shops. That’s probably when DC worked out a direct deal with Universal, I just don’t think it got publicly announced as a big thing. As DC wasn’t exclusive then, I don’t think the deal with Universal restricted them from distributing to the US.
The same probably happened with a lot of other publishers. I’ve heard there are only 2 publishers that Universal is not distributing to Canadian stores, which is to their detriment. Most comic shops in Canada order their books from Universal, both because like most brick and mortar retailers they hate giving money to Lunar/DCBS, but also because shipping is way cheaper through Universal.
I do know that Lunar did offer publishers 2 deals and the better discount was the exclusive one. Some publishers took it because Diamond had not paid them in a while and were needing money, plus there wasn’t any other US comic shop distributor outside of PRH and they weren’t able or likely going to get distribution through them. Image of course is one of them and I know there are others. We’ll see how it goes as those exclusive contracts come up for renewal.
I’d have to look again but I think when DC went to just Lunar the word “exclusive” was thrown around but will have to look again if that was them saying it or news coverage adding it. But, they could have also been “exclusive” for the year-ish until DC signed with Universal.
Overall, I think the lesson of Diamond is exclusive distribution is not the best idea. Lunar has numerous issues from multiple publishers and retailers I’ve talked to, beyond the DCBS connection.