Time Warner Opens at 3-Year Low After Spurning Murdoch Offer

In June of 2014, Rupert Murdoch’s Twenty-First Century Fox Inc. (NASDAQ: FOXA) made an unsolicited attempt to acquire Time Warner Inc. (NYSE: TWX) for $85 a share in cash, amounting to $75 billion. Time Warner rejected the offer as too low, but as of last night’s close the stock traded at around $63 a share, and the company’s market cap had dropped to about $50.5 billion. Shares opened Wednesday morning at around $55.50, a price they haven’t seen for three years.

Time Warner, which owns CNN and HBO in addition to the Warner Bros. movie studio, did all it could to keep the share price from plummeting. The company raised its quarterly dividend from $0.35 per share to $0.4025 and announced a new $5 billion share buyback program. The company also offered full-year 2016 guidance for earnings per share of $5.30 to $5.40, above the $5.26 analyst consensus.

But investors have focused on revenues that fell from $7.53 billion in the fourth quarter of 2014 to $7.08 billion. A significant contributor to the revenue shortfall was the rather dismal subscriber number for the company’s HBO Now streaming service. On the conference call, CEO Richard Plepler said that Time Warner had signed up about 800,000 subscribers for HBO Now. Analysts were looking for at least a million, and some were looking for up to 2 million. That is not an auspicious beginning for the $15 per month HBO Now service that does not require a cable subscription.
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Time Warner shares traded down about 2.3% to $61.77 Wednesday afternoon. The stock’s new 52-week low is $55.53, and the 52-week high is $91.34. That Murdoch offer should still be looking like a missed opportunity for shareholders.