In It to Win It

In It to Win It: 

What if you could own part of your favorite sports franchise?

     What are the publicly traded sports companies out there? Technically there is only one that is publicly traded and is the sole business of that company, Manchester United (NYSE: MANU). However a few others include the New York Knicks (NBA), New York Rangers (NHL), and New York Liberty (WNBA) who are all owned by Madison Square Garden (NYSE: MSG). Then we have the Atlanta Braves that are wholly owned by Liberty Media (NASDAQ: LMCA) who also own

Could you own part of the Braves?

several minor league affiliates. Liberty recently announced that they would be publicly offering the Braves under a tracking stock (no voting rights) with the ticker symbols of BATRA, BATRB, and BATRK.

     What if you could own part of your favorite sports team? To answer that question we will have to answer a few others first. What are the benefits to a company and to it's shareholders when it becomes publicly traded?
     What does the company get when they become publicly traded? #1 They get a boat load of cash. That is really one if not the only benefit received from being a publicly traded company. Companies run the risk of losing majority control of the company, their business practices are much more regulated, and may come into conflicting decision making based off of what's better for the company or what's better for the shareholders. 

     What rights do you get when you own a share of a publicly traded company? #1 You get to vote, generally individual shareholders own so little of a company that their votes wouldn't matter. But, in actuality if given the proper motivation and percentage of voters, shareholders could change the businesses decisions. #2 You get to profit or lose money depending on how successful the business is.

     Does it make sense for a professional sports team to become publicly traded and does it make sense for you to be a part owner? Lets take a look at the beloved Browns to try and answer this.

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      The Browns are owned by James Arthur Haslam III (Jimmy Haslam) and have been since he bought them in 2012 for nearly $1 Billion (actually had to sell his stake in the Steelers first). Forbes values the Browns at around  $1.5 Billion, presumably that is what the Browns would be able to raise if they had an Initial Public Offering (what makes your company publicly traded). The Browns could use this money to renovate their existing stadium, build a new stadium, hire better management, sign better players, create a marketing campaign, and the list goes on.

     Should the Browns become a publicly traded company then? No, they (Jimmy Haslam) could possibly lose their majority interest in the company and have to succumb to the interests of their shareholders (fans). This could possibly put the future of the franchise in the hands of fans that do not know how to run a professional sports team business (sorry it is true). For the Browns I would think the risks greatly outweigh the benefits.

Washout Quarterback

     Should you, a perennially disappointed Browns fan, invest in the Browns?  Yes, you should if the Browns were ever silly enough to become publicly traded. Despite their annual losing records Jimmy Haslam and the Browns actually run a decent business. The valuation of the Browns has increased almost 50% to $1.5 Billion, revenues have increased almost 52% since 2006 to $313 million, and they had an operating income of almost $35 million in 2015 according to Forbes. All these positives would surely increase the value of it's shares and thus your net worth if you owned shares. You would also then be able to voice your opinions a bit more loudly as a fan base if you actually owned part of the company.

     I know you know the Browns suck, and I am sure their management knows too, but how cool would it be to actually own a part of your favorite sports team?! You could even possibly influence their draft picks instead of yelling at your friends about if they should draft another wash out Quarterback. The best thing is even if they do poorly (win loss wise) you could still actually profit off of your team and possibly not end another season in disappointment.
     

Is She Worth It?...Oprah Winfrey

Is She Worth It?

Oprah Winfrey and Her Purchase of Weight Watchers

     On the 16th of October Oprah Winfrey purchased a 10% (6.4 million shares) stake in Weight Watchers (WTW) worth $43 million. In 2 days that stake was at one point worth $119,404,000, some may think that's a bit fishy, using your name to solely increase the price of a stock. The company has seen a steady decline in revenue over the last 4 years which has been attributed to mobile fitness devices and apps. For Oprah it makes sense to enter into a deal and purchase a stake in the company,
her media empire could do wonders for bringing in customers. Right off the bat her name alone has increased the valuation of the stock, but does her expertise and possible help in marketing bring enough to the table to turn this company around, not in valuations, but in real earnings?

     No is the short answer. But we aren't in the game of answers that short, we like to expose the facts so that you can make informed decisions in the future. To give you transparency here are the details about their partnership (taken from their website):

• Member – Winfrey has joined the program and will candidly share her experiences and perspective along the way.
• Board Member and Adviser – Winfrey will bring insight and strategy to program development and execution that reflects not only her own experiences as a member, but also her unique ability to inspire and connect people to live their best lives.
• Owner – Winfrey will purchase newly issued shares representing 10% of the shares outstanding and will receive options to acquire an additional 5% of the fully diluted shares.

     First lets talk about what challenges they have going forward. The first one is being able to gain and retain new customers. Weight Watchers has been primarily losing customers to apps people can easily access on their phones, and for free. The next one is a bit of a conundrum, their business isn't actually good for business. If their program works then the people that sign up will pay, lose weight, and then no longer need Weight Watchers and cancel their membership. They will need to figure out how to retain customers after they have lost their weight. 

New Weight Watchers App

     Even before they signed a deal with Oprah Winfrey Weight Watchers has rolled out new offerings that include subscriptions that offer either entirely online & app based weight loss products starting at about $20 a month or online, app, and in person meetings starting at about $33 a month. The challenge they face here is having a premium enough service to were a free app is not an effective alternative. Perhaps they could offer a freemium app that requires payments for increasing amounts of service or goods. 

     Next they have to keep people paying past the point of weight loss, after all the most important part of weight loss is keeping it off. If they can monetize this part of their customer base they will have created a steady predictable portion of their revenues. Going forward they should add services that will help do this like identifying diet trends that have made you gain rather than lose weight or having a different point system to maintain weight. Monetarily they could offer discounted memberships for those that get to and maintain their healthy weights. This would give them an incentive to stay with weight watchers and stay at their healthy weight.

Will her Media Empire Help? 

     So how does Oprah Winfrey solve these dilemmas that weight watchers faces? She solves maybe one at best solely through her marketing power, and that's gaining new customers. The other problems will only be helped by giving their solutions better marketing power than what they already posses. 

     Should this change your view on investing in weight watchers or not? I would say not yet, as with any company I would not recommend investing in anything that does not have positive results. Weight Watchers definitely lacks positive results seeing as their most recent reporting Q3 15' showed they were down 20.8% since last year. Right now a purchase in Weight Watchers is simply an educated gamble.