Viacom shares were up more than 5% each Tuesday after an activist shareholder released a 99-page report calling for the ouster of chairman Sumner Redstone and the rest of his management team, and a pairing with AMC Networks.
Viacom stock was down about 45% in 2015 as the company struggled with slumping ratings and a soft advertising market. Adding to the pressure has been the poor health of chairman and largest shareholder Sumner Redstone, which has raised questions as to the fate of the company once the 92-year old executive passes.
Viacom shares were up nearly 8% ($3.15) to $43 each in early trading Tuesday. By the afternoon, the stock was still up about 5% ($2 each) to $41.85 per share and closed at $41.72 per share, up 4.7% or $1.87 each.
In its report, SpringOwl called for Redstone’s ouster as chairman of the board as well as the removal of CEO Philippe Dauman and chief operating officer Tom Dooley. In the report, SpringOwl Asset Management, which owns less than 5% of Viacom stock, criticized the company for selling its stake in Vice Media too early, paying its executives exorbitant compensation, and dropping the ball on OTT, and digital media.
In the report, SpringOwl wrote that Viacom sold its 50% stake in Vice Media back to the company in 2007 for $3 million (Vice has been recently valued at about $4 billion); is “creatively bankrupt,” sped its decline by licensing content to Netflix in 2011, missed the OTT boat by not investing in any over-the-top providers and has paid Dauman and Dooley a combined $432 million in compensation in the past five years, well ahead of any other media company.
SpringOwl has come up with a 10-point plan that he believes will reverse Viacom’s course. Included in that list, aside from management changes are drastically reducing expenses, exploring an AMC asset merger, explore an investment by Chinese e-commerce giant Alibaba and/or Amazon in its Paramount Pictures movie studio, spearhead a new push into OTT and transform the creative culture at the company to develop new hit shows.
While SpringOwl claims it could increase Viacom’s stock price by as much as 135% with its new plan, it realizes that its chances of getting there are slim. Any changes like the investor is proposing would require a majority shareholder vote and Redstone controls 80% of Viacom’s voting stock.
SpringOwl has made similar overtures to Yahoo, calling for the ouster of CEO Marissa Mayer and to lay-off about 9,000 workers in December.
In a statement, Viacom said its management and board is committed to enhancing shareholder value.
“Viacom's board and management team are completely focused on delivering long-term value to shareholders,” the company said in the statement. “We are looking to the future and the opportunities ahead. We are encouraged by the growth in our strong international business, the ratings upswings at most of our networks, Paramount’s strong start in 2016, our leadership position in advertising technology and other positive recent developments.”