Viacom CEO loses $3.4 billion betting on his own company
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.