Update: WMG Stock Rises After Reports Of Going Private
August 8, 2007 at 5:45 AM (PT)
It seems that WARNER MUSIC has found a way to raise the price of its stock -- spread rumors that its principal owners are considering taking the company private ... again.
BLOOMBERG reports that shares of WMG stock surged as much as 21% after the NEW YORK POST reported that its majority owners, concerned about the lagging stock price, are thinking about taking the company private again. The shares, which have lost over 50% their value this year, recently bottomed out at under $10 for a while, have since risen to somewhere in the $11 neighborhood.
Clearly we've got to try and deliver increased value to our shareholders given where our share price is.
Yesterday THE NEW YORK POST reported that the downward trending of WARNER MUSIC's stock price, coupled with investors' negative sentiment for the music industry in general, has the record label's financial backers thinking it might follow TERRA FIRMA's example with EMI and take WARNER MUSIC private. According to a source inside WARNER MUSIC, the company's plummeting stock price -- which closed trading yesterday down 10% at an all-time low of $9.89 after the label released mixed third-quarter results -- is frustrating its financial backers.
"Given the company's cash flow performance, they think the stock should be trading between $18 and $20, not $10," this source said.
WARNER MUSIC's financial backers, which include THOMAS H. LEE, BAIN CAPITAL and PROVIDENCE EQUITY PARTNERS, expected the company's stock price to rebound to around $14 after withdrawing from the EMI auction believing that it relieved investor concerns about overpaying, sources said.
Frustration began mounting among the trio when that didn't happen and they are now exploring the possibility of taking WARNER MUSIC out of public hands just two short years after taking the label public.
While not speaking to the going-private issue, Warner CEO EDGAR BRONFMAN JR. told analysts yesterday, "Clearly we've got to try and deliver increased value to our shareholders given where our share price is."
To that end, WARNER disclosed yesterday that it is increasing its minority stake in IRVING AZOFF's FRONT LINE MANAGEMENT, home to LENNY KRAVITZ, AEROSMITH, CHRISTINA AGUILERA, THE EAGLES and JOURNEY, to $110 million. WARNER hopes to start seeing the benefits of merchandising, touring and ticketing revenue by 2009.