Vi­a­com CEO loses $3.4 bil­lion bet­ting on his own com­pany

The Pak Banker - - COMPANIES/BOSS -

Add a stock re­pur­chase pro­gram that now looks like a dud to the woes of Vi­a­com Inc. Chief Ex­ec­u­tive Of­fi­cer Philippe Dauman.

Vi­a­com spent $15.2 bil­lion buy­ing back shares over the past five years, at an av­er­age price of $60.62 each, ac­cord­ing to data com­piled by Bloomberg. The stock closed at $47.02 Mon­day, mean­ing the com­pany, con­trolled by 92-year-old Sum­ner Red­stone and led by Dauman, has lost $3.4 bil­lion in­vest­ing in it­self.

Buy­backs am­pli­fied the re­bound at media com­pa­nies af­ter the Great Re­ces­sion knocked down their stocks. The seven largest U.S. en­ter­tain­ment com­pa­nies have re­pur­chased more than $100 bil­lion of their shares since 2010. Now the in­dus­try is show­ing signs of stress, and peo­ple are ques­tion­ing whether the funds would have been bet­ter spent in­vest­ing in new pro­gram­ming or tech­nolo­gies. That's es­pe­cially true at Vi­a­com, the only one to pay an av­er­age price that's higher than its shares trade to­day.

"What ex­actly are they do­ing to em­brace the rapidly chang­ing habits of youth cul­ture," wrote Jason Hirschhorn, the for­mer chief dig­i­tal of­fi­cer of Vi­a­com's MTV unit and a fre­quent critic of Dauman, in his daily news­let­ter, me­di­aREDEF. "Buy­backs? With­out a plan just buy­backs at a loss," wrote Hirschhorn, who has also held se­nior roles at Sling Media and MyS­pace. Jeremy Zweig, a Vi­a­com spokesman, said the com­pany de­clined to com­ment on its buy­back spend­ing.

Vi­a­com, the owner of MTV and Nick­elodeon, on Aug. 6 re­ported lower sales and profit, high­light­ing the loss of view­ers and ad­ver­tis­ers to online play­ers that have tar­geted the com­pany's younger view­ers. The shares fell 14 per­cent in one day, clos­ing the week with a 20 per­cent loss, worst among its big media peers. Dauman, 61, a for­mer cor­po­rate at­tor- ney who has led Vi­a­com since 2006, sus­pended stock buy­backs in April af­ter an­nounc­ing a restruc­tur­ing plan de­signed to boost profit. The com­pany wanted to keep its debt within its tar­geted range, he said at the time.

Stock buy­backs will re­sume in Oc­to­ber "in a re­spon­si­ble way," he told in­vestors on a con­fer­ence call last week, pledg­ing to main­tain Vi­a­com's in­vest­ment grade debt rat­ing. The com­pany is spend­ing record amounts on orig­i­nal pro­gram­ming and in­vest­ing in new tools to help ad­ver­tis­ers bet­ter tar­get their spend­ing on Vi­a­com's net­works, he said.

Vi­a­com has spent more than $21 bil­lion on shows since 2010, ac­cord- ing to the com­pany, and made ac­qui­si­tions such as its $757 mil­lion pur­chase of Chan­nel 5 in the U.K. last year. "Vi­a­com is seiz­ing ev­ery op­por­tu­nity," Dauman said on the call. "We con­tinue to do the hard work to con­fi­dently move for­ward and lead our in­dus­try through the latest pivot."

Since 2009, U.S. com­pa­nies have spent $2.4 tril­lion on stock buy­backs, which boost earn­ings per share even if prof­its don't change. Politi­cians, in­clud­ing Demo­cratic pres­i­den­tial can­di­date Hil­lary Clin­ton, have crit­i­cized the prac­tice, say­ing com­pa­nies should use the money to hire work­ers, boost wages, build plants and fund re­search.

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