When Time Inc was first spun off from the mother ship it has called home for years Time Warner, the company experienced a record high share price for the first two weeks. But after that, the stock has been in decline ever since. According to a report by Seeking Alpha, there is nowhere for Time Inc to go but down, even possible bankruptcy. The report says it doubts Time Inc will generate any new value from investing further in the business. Here are some disturbing highlights from the report:
- The share price is about half of what it was when it first spun off from Time Warner
- The debt on the company’s balance sheet is equal to more than the total market capitalization of the company
- Time Inc has paid out more in dividends and interest in each of the past two years than it produced in operating income
- The company started out with enough cash to sustain operations for a few years but is running out of cash each year.
Time, and its print competitors, can go online (which they have) but find the competition for eyeballs and advertising dollars daunting there, too. And with the political divide among potential readers deepening its editors face the challenge of not alienating half of its readers by taking a stance on every issue covered. Much of this attrition may have already occurred but there could be more yet to come. It is a never-ending battle. Advertisers want to spend their respective ad budgets as efficiently as possible and companies like TIME are becoming less relevant and less efficient than other channels.
Back in the spring, the company’s brass decided not to sell and instead would focus on its go it alone strategy of building out its digital offerings and rolling out new brand extensions. It confirmed last week that it is the process of unloading several assets including its UK division and all its 60+ brands. The pending sell off is part of an effort to save hundreds of millions of dollars. If the asset sell off is a success Time Inc will be a much smaller company come 2018. But some are wondering if the sale of those assets will be enough. Could Time Inc sell off other “crown jewel” brands like Time magazine, Entertainment Weekly and InStyle? It is believed People magazine is its biggest money maker which could potentially mean that those brands are sale targets. If Time Inc’s profits fail to increase soon, a backlash could develop against the decision not to sell when offers were being put on the table. Edgar Bronfman, the man who kicked off the bidding war for Time Inc said that the company will not be able to accomplish what it is setting out to accomplish if it remains a public company. He also famously said that Time Inc is a magazine publishing company begging to be a media company. Ever since its spin off it has been working hard to shake its print legacy, but today the bulk of the company’s revenue still comes from print.
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