Can Forbes Keep Its Enterprise Value From Falling?

In 2006, Elevation Partners, the same venture firm which bailed out Palm (PALM) and counts U2 lead singer Bono as a managing director, put about $275 million into Forbes to get a 40% piece of the media company according to GigaOm and The New York Times. That would have put a price tag on Forbes at $700 million.

It may not be worth that much today and its value is almost certainly falling in the current advertising environment.

Based on Publishers Information Bureau numbers, Forbes will have about $275 million in advertising revenue this year. Because those numbers are calculated at the open rate card, the company probably gets about 75% or that, or $200 million. So far this year, Forbes advertising pages are off 16%.

Based on the numbers of subscribers Forbes has and assuming that the magazine gets $20 a year for each one, circulation revenue should be about $120 million. Taking the advertising revenue from TheStreet.com (TSCM) and multiplying it by three, which adjusts for the difference in their online audiences (using ComScore data) and internet ad income should be about $60 million. That puts the total annual revenue of Forbes at $380 million.

Using the same multiple of sales that TSCM has as a public company, and Forbes is worth about $500 million,  a but more than two-third of its valuation in 2006.

Like Fortune and BusinessWeek, Forbes maintains a large editorial staff and a number of people who run the business. It is not possible to say whether the company makes money because it is private, but as advertising falls, keeping the enterprise value of the firm up will become more difficult each month.

Douglas A. McIntyre